The exact proportion varies per deal, but we've seen the standard in our research be around a 50/50 split.
The basic premise is that they take a local business (such as a restaurant), cobble together a deal ($25 for $50 worth of food), sell the deal (yum!), and then split the sale in some proportion ($12.50 to Groupon and $12.50 to the merchant). Groupon's revenue model is pretty simple. Sounds absurd right? Well, let's walk you through our study, show you the facts and calculations, before illuminating some ways you can avoid falling into a similar trap.Ī Quick Overview of Groupon's Revenue Model, Including Its Quirks Through our study, we've discovered that Groupon is losing roughly $1,117,808 per day (or $408 million/year), and that's a conservative estimate. Of course, we wouldn't write an article unless it was their pricing. While we're rooting for Groupon to figure their issues out, we unfortunately found a huge chink in their already lightening armor that goes beyond local business relations or user acquisition: their color scheme. With a concept so novel that none us thought of it (Group + Coupons = Group Coupon or Groupon), they took the internet by storm in 2008, turned down a $5.3 billion offer from Google in 2010, and limped through a 2011 IPO into 2012 trying to figure out proper unit economics for profitability. Well, except for the endless barrage of other daily deal sites that have spawned in Groupon's wake.
They developed such a simple, yet powerful idea, and there's nowhere on the internet where I can find a deal on everything from a night out on the town to an oil change. Let us know who we should test next by emailing Wall Street and a lot of the tech press love to hate on Groupon, I'm a huge fan. Note: This is the first in our "They're leaving money on the table" series, where we actually test out and find which companies are leaving an enormous amount of cash on the table through improper pricing.
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