Groupon is one of the fastest-growing companies of all time. Less than three years after CEO Andrew Mason launched it, it has more than 7,000 employees, operates in 43 countries, and is on pace for more than $2 billion in revenue this year. Its model is simple—it e-mails consumers with discount offers for goods and services in their cities–but it has taken off because previously there were few other cost-effective ways for small brick-and-mortar businesses to advertise to local customers.
Mason created Groupon by repurposing technology he’d developed in 2007 to help groups of people pledge to perform some civic action as long as a critical mass of users agreed to take part. The twist in Groupon was that the collective action would be buying something. Starting in Chicago, Mason began offering to deliver a daily promotional discount to consumers, who get the deal only if enough people sign up to make it worthwhile for the business. If not, the deal is off.
Groupon isn’t close to being profitable yet, because it’s spending hundreds of millions of dollars annually on marketing, sales-force expansion, and other things required to move on from startup mode. It also has to contend with new competitors hawking local bargains. Mason plans to adapt with, for instance, a mobile service called Groupon Now that lets people see offers near where they happen to be. Groupon Now is also more flexible for businesses, which can offer bargains at targeted times, such as when sudden cancellations leave a restaurant with empty tables to fill. —Brian Bergstein