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  • May 2014
  • Case
  • HBS Case Collection

Groupon, Inc.

By: Krishna G. Palepu, Blythe J. McGarvie and James Weber
  • Format:Print
  • | Language:English
  • | Pages:23
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Abstract

Internet coupon site "Groupon" grew revenues rapidly and went public, but struggled to impress investors or operate profitably. Did it have a sustainable business model? Groupon sold coupons called Groupons which purchasers used to acquire goods or services at discount prices from participating merchants. It went public in 2011. Merchants liked Groupons because they paid nothing for advertising through Groupon unless a customer made a purchase. Groupon earned revenue by taking a percentage of every Groupon sold. Groupon sold Groupons by utilizing a large sales force which contacted individual merchants to sign them up. Groupon's sales grew rapidly and exceeded $2.5 billion in 2013. The challenge Groupon faced was earning profits. It spent heavily on marketing to acquire customers, who showed signs of becoming tired of receiving discount offers, and merchants, many of whom found that offering Groupons only brought them unprofitable customers. In an attempt to become profitable, Groupon introduced new products and strategies; however it had yet to succeed. Some observers questioned whether the company could remain viable. Its management had not inspired confidence and it had several conflicts with the SEC and had to restate its financials. In early 2013, Groupon fired its founding CEO and replaced him with co-founder Eric Lefkofsky. Lefkofsky must now guide Groupon forward.

Keywords

Accounting; Corporate Governance; Entrepreneurship; Financial Management; Financial Reporting; Financial Statements; Organizational Culture; Strategy; Web Services Industry; United States

Citation

Palepu, Krishna G., Blythe J. McGarvie, and James Weber. "Groupon, Inc." Harvard Business School Case 114-038, May 2014.
  • Educators

About The Author

Krishna G. Palepu

Accounting and Management
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  • Swvl: Smart Mobility for the Masses By: Krishna Palepu, Esel Çekin and Menna Hassan
  • DealShare: Social E-Commerce for the Indian Mass Market By: Krishna G. Palepu and Malini Sen
  • Introducing EVA at ISS: A Better Way to Evaluate CEO Performance and Compensation? By: Jonas Heese, Charles C.Y. Wang and James Weber
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