If you haven’t yet heard about the latest internet sensation, the company Groupon earned a reported two billion dollars in revenue in only their second year – making it the fastest growing company in history. In over 200 cities in the US and with over 50 million subscribers around the globe, Groupon offers members a daily deal with deep discounts from local businesses. The members are notified each morning by Facebook, Twitter or email and then have a time limit in which to buy. The deal only becomes active if a predetermined minimum amount of buyers opt to purchase the coupon.
Groupon is essentially offering small businesses a way to market themselves with no marginal, upfront cost. The business only pays for the advertising if a customer actually makes a purchase. The payment is in the form of a discount with Groupon taking a 50% cut. In other words, if you spent $40 on a Groupon offer for spa services retailed at $80, Groupon gets $20.
Using the power of social media to market their brand, Groupon has exploded into the market with a business model that has virtually no entrance barriers. With new competitors popping up daily, they still manage to maintain a 70% market share and claim that for every business featured, seven are turned away.
BTW. They recently turned down a buyout offer from Google worth six billion dollars!