Prepared by the students of strategic management at the MBA program of IE Business School, this presentation analyzes Groupon’s position in the US market, the pitfalls in its current business model and recommends solutions for sustainable growth

1. Groupon: The road ahead
Anurag Jaiswal
Ignacio Muñiz Garcia
Mariana Penzini
Pedro Oliveira
Roman Viñoly
Shirley Kleinman
IE Business School

2. Agenda
1. Introduction
2. Situation analysis and challenges
a) Internal analysis and challenges
b) External analysis and challenges
3. Recommendation
1

3. What is Groupon?
Groupon is deal-of-the-day website that has grown exponentially worldwide
Selected
deals every
day!
A minimum number of Groupon keeps
people must buy the 50% of the deal
30% to 90% deal for it be valid value
Discount!
Groupon’s growth record Rejects $6B buyout by Raises $950M funding
Expands to Latin Google, and expands to and expands to India
America, Acquires Clan HK, Singapur and Taiwan South Africa and Israel
Descuento
500
Expands to Japan
400 Expands to Europe via and Russia trough
acquisition of CityDeal acquisitions
300 Raises $30 M in a
Deals launched in funding round
200 major US cities
100
0
Apr-09
jun-09
sep-09
oct-09
nov-09
Apr-10
jun-10
sep-10
oct-10
nov-10
jul-09
Aug-09
jul-10
Aug-10
Jan-10
feb-10
Jan-11
feb-11
Dec-09
Dec-10
mar-09
may-09
mar-10
may-10
mar-11
Source: Groupon Reports and neXtup Research
2

4. Local Deals Market
The local deals market in the U.S. is expected to increase at a faster pace than the
overall Online ads market
Local deals market in the US
3,620
3,120
Local Deals Market (Millions)
2,620
2,120
20% CAGR
1,620 3,069
2,557
1,120 2,131
272% CAGR 1,776
1,480
620 1,000
200
120
2009 2010 2011E 2012E 2013E 2014E 2015E
Source: eMarketer and neXtup Research Estimates
3

5. Groupon Performance in the US
The growth seens to be slower and even negative in the last month
Groupon Revenues in US
Millions USD
100 88,9
75,6 80,5
80 61,7
18% CAGR 52,8 54,5
60 45,5
40 26,4 30,5 29,4
20,6 5% CAGR
13,5 19,0
20 10,8
0
Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11
Source: Groupon website
Groupon.com Unique visitors
Millions
20
15,6 14,7 15,2
15
11,2
22% CAGR 8,3 8,6
10 6,5 7,6
4,6 4,9
5 2,0 2,5 3,1 12% CAGR
1,9
0
Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11
Source: Compete
4

6. Agenda
1. Introduction
2. Situation analysis and challenges
a) Internal analysis and challenges
b) External analysis and challenges
3. Recommendation
5

7. Groupon main challenges
Groupon is facing both, internal and external challenges
External Challenges
Higher competition
Internal Challenges
Subscribers and Local business low service
6

8. Problems in operations and services – local businesses and customers
Leading to low level of satisfaction and loyalty
Local-businesses face ..to upsell to customers ...and to turn Groupon’s customer
Local difficulty to best for more than the customers to repeat profile changes from
Business structure and face value of the full-price customers deal-savvy to the
operate a deal coupon general population
Only 66% of deals were profitable Only 50% of customers Only 31% of customers
Business NO willing
to collaborate again
Low level of satisfaction and 42%
Repeat customers ? high level of Churn rate 58%
Business willing to
collaborate again
End-customers receive low quality Not redeeming vouchers
End service and bad experience
customers from the local-business
~ 20% breakage rate
Source: Jesse H. Jones Graduate School of Business 7

9. Why revenues are decreasing
The internal service problems are damaging the number of deals and their value
Bad service and experience
# of subscribers from subscribers decrease de
number of deals
Deal Subscribers
Deal per
subscribers ! Bad service and experience from
local business will damage
# of deals Groupon’s negotiation power to offer
Business deals
deals with more gross price and
300 deals # of Local Business discount to customers
demand
!
Deal Local Business
Deal per Local
Business
Groupon Net
Revenues
$ 30.000 Discounted Value Gross price !
$ 200 $ 500
Net deal size
!
$ 100
Groupon Revenues in US Discount to
Millions USD Share to Groupon
100 88,9 customers
75,6 80,5
80
18% CARG 52,8 54,5
61,7 50% 60%
60 45,5
40 26,4 30,5 29,4
19,0 20,6 5% CARG
20 10,8 13,5
0
Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11
Source: Groupon webside
8

10. Local Deals Industry analysis
Due to the high profitability of the industry and the medium-low strength of the
competitive forces, we expect the entrance of new competitors in the market
Market characterized by network externalities
High strength
Medium strength
Medium bargain power of suppliers Low strength
 Moderate power in the hands of the mass
social-media players
– Facebook and Google
 Low power of the IT suppliers
Medium threat of new entrants Medium Threat of substitutes
 Medium barriers to entry  Significant numbers of substitutes
– low capital-intensive nature of the – Other communication tools
business,… Competitors – Coupons catalogues
– …but high network externalities
Low barging power of customers
Business Subscribers
 Low bargain power of the business  Low bargain power for the subscriber
– Low concentration of business, very atomize – Large number
– Unorganized nature
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11. Competition analysis
Local deals market is heating up in the US
Our analysis shows that there are the following main competitors in the US.
Here is a comparative analysis with Groupon:
Is deals their Local
core Offers Types of deals Operations Description
business? Sales force
 Offers of the day
Local services and
products 
 
Local services and Amazon.com is stakeholder
Offers of the day
products 300+ cities in US
 Offers Catalogue
Premium Products
and services  6 metropolitans in US
X Offers of the day
and catalogue
Local services and
products X BETA to be launched in
Portland, Oregon
X Offers catalogue
Local services and
products X Businesses join for free
10

12. Competition analysis
A comparison of services offered
Matrix
Size = subscribers
High Groupon
social
% Gross Margin
Google
Gilt City
Facebook
Low
Low Customized service High
11

13. Competition analysis
A comparison of revenues
Size = Revenues
100%
80%
Average margin per deal
60%
40%
20%
0%
-5 0 5 10 15 20 25 30 35
-20%
Average number of deals offered each day
12

14. Why revenues are decreasing
The competitive increase of the market is putting pressure in the margins
# of subscribers
Deal Subscribers
Deal per
subscribers
# of deals
Business deals
300 deals # of Local Business
demand
Deal Local Business
Deal per Local
Business
Groupon Net
Revenues
$ 30.000 Discounted Value Gross price
$ 200 $ 500
Net deal size
$ 100
100
Groupon Revenues in US
Millions USD
75,6 80,5
88,9
Share to Groupon ! Discount to
customers
80
18% CARG 52,8 54,5
61,7 50% 60%
60 45,5
40 26,4 30,5 29,4
19,0 20,6 5% CARG
20 10,8 13,5
0
Jan-10 feb-10 mar-10 Apr-10 may-10 jun-10 jul-10 Aug-10 sep-10 oct-10 nov-10 Dec-10 Jan-11 feb-11
Source: Groupon webside
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15. Agenda
1. Introduction
2. Situation analysis and challenges
a) Internal analysis and challenges
b) External analysis and challenges
3. Recommendations
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16. Recommendations
Strengthen internal capabilities & differentiation to safeguard market-leader position
Recommendation Description Consequence
 Advise the businesses on how to best structure and operate a deal
– cap size • High quality of
Deal management service
– Number of employees • Repeat
consulting services
– Upsell customers
– Follow-up
 Collect data about customers • Coupon
Deal customization  Offer each customer the most relevant deals purchase
• Threat of
 Exclude the businesses’ existing customers cannibalization
 Provide a feedback platform to both businesses and customers
• Quality of local
Filtering mechanism  Block particular customers or take corrective measures against businesses businesses
 Identify ”best” businesses and build stronger long-term relationships • Quality of end
customer
 Loyalty programs • Customer loyalty
Brand loyalty • Repeat
 Improve the customer services to the end-customers customers
• Revenue growth
• Wider customer
Higher value  Target the “luxury” businesses category base
• Breakage
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17. Thank you!
Q & A?
16