Many local businesses offer discount vouchers and coupons for their goods and services. Groupon finds these deals, negotiates with the businesses, and makes the offers available for consumers on an online platform. Groupon makes money from fees paid by merchants whose customers use their coupons, and the businesses gain attention and patronage from consumers.
Groupon isn't the only company that offers this service—it competes with RetailMeNot, Rakuten, Slickdeals, DealPlus, and many others. Here's how it makes money, along with a breakdown of its financial and operational circ*mstances.
Key Takeaways
- Groupon generates money by selling vouchers and card-linked deals, which connect consumers with local businesses.
- Groupon faces many challenges in the years ahead after experiencing decreasing revenue, operating cash, free cash flows, and active customers.
- The company plans to implement team changes, address marketing and sales issues, and position itself to be more efficient and profitable.
- Groupon appointed an interim CEO in March 2023, Dušan Šenkypl, who intends to guide the company back to growth.
Groupon Financials
Groupon divides its revenues into two categories, gross billings and revenue. The company also uses non-GAAP metrics, like free cash flow and adjusted EBITDA, to measure and report performance internally and to shareholders. However, regulators don't recognize these non-GAAP measures, so it reports GAAP-compliant measures on its mandatory filings. These are the metrics used here.
For the quarter ending March 31, 2023,Groupon reported $121.6 million in revenue. According to its quarterly report, the company had an active customer base of 18.2 million, down from 18.8 million the previous quarter.
Groupon was the first company to act as a middle-man providing coupons between local merchants and consumers.
The company experienced a net loss for the quarter of $29.1 million and a operational loss of $30.57 million.
Groupon's Business Segments
Currently, Groupon finds and presents coupon and savings opportunities to consumers worldwide. It has divided its revenue-generating operations into two segments, North America and International.
Each segment reports the same metrics to measure its financial and operational performance.
North America
As the name suggests, the North American segment operates in the U.S. and Canada. The company's platform gathers coupons and deals from across the country and consolidates them for consumers, working to make it easier for them to save. Groupon also sells third-party products on its platform.
The segment lost significant active customers and revenues in the first quarter. Groupon attributes the loss of customers to a decline in engagement on its platform, which led to recent losses, including the first quarter of 2023.
Groupon uses marketing to acquire customers, who access its services through a marketplace online via mobile applications or a website.
In the first quarter 0f 2023, Groupon's North America segment generated $89.3 million in revenues.
International
Groupon offers its services internationally in:
Its services remain the same internationally, but as with the U.S. and Canada, it focuses on the area it operates in. In the first quarter of 2023, Groupon's International segment generated $32.4 million in revenues.
Previously, Groupon sold some products directly but discontinued the practice in 2020 (North America) and 2021 (Internationally).
Groupon's Recent Developments
Groupon has been experiencing difficulties maintaining its position in the market. Revenues, profits, and active customers have been declining steadily since 2018. The company began a restructuring plan in 2020 and, as of June 2023, has nearly completed a transition to a model it believes will bring back its competitive edge.
Dušan Šenkypl, appointed as interim CEO in March 2023, addressed shareholders in his first quarterly letter, outlining his strategy to revamp how the company markets itself, grow its merchant base, and focus on geographical demand to target customers in the appropriate areas.
How Does Groupon Work?
Consumers can go to Groupon.com to claim free deals, like coupons, for local goods and services at a discount. Or, they can use a Groupon Gift Card to get Groupon deals. Businesses can use Groupon as an advertising and marketing service. Payments for Groupon deals go to Groupon, which deducts a fee off the top and then sends the rest to the merchant.
Does Anyone Still Use Groupon?
According to its latest quarterly filing, Groupon is still used by more than 18 million consumers worldwide.
What Is Groupon Used For?
Groupon collects coupon and deal information and coordinates with merchants to offer these deals through its platform to customers in one convenient place.
The Bottom Line
Groupon became a favorite of deal-hungry consumers. Cashing in is as easy as signing up and purchasing a voucher for the best deal possible. But increased competition and shifting consumer trends have dented the company's bottom line.
The internet-based company has undergone significant changes in recent years. Though revenues declined throughout its recent history, Groupon is committed to changing to better serve customers and businesses alike.
