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Business Operations Business Models

How Does Groupon Make Money (Business and Revenue Model)

The Groupon business model

How Does Groupon Make Money?
Here’s what you should know:
  • What is Groupon, and how does Groupon work?
  • How does Groupon make money?
  • Merchant Commissions
  • Product Revenue
  • Groupon’s Subsidiaries, Acquisitions, and Exits
  • Groupon’s profit and revenue
  • What is the Groupon business and revenue model?
  • Groupon’s funding and market cap

How does Groupon make money? Here is a full, in-depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the Groupon business model, their profit and revenue, and how Groupon works.

What is Groupon, and how does Groupon work?

Groupon is a coupon marketplace that connects buyers and businesses through discounted travel, goods, and services’ deals of up to 70% or more.

Founded in 2008 by Andrew Mason, Groupon began trading on the NASDAQ on November 4, 2011, under the ticker symbol “GRPN”.

Since its founding, Groupon has worked with over one million merchants and currently attracts more than 25 million customers per year to its platform.

How Groupon works is: Users can visit the marketplace by going to groupon.com or through downloading the app. Once on it, users can browse and find up to 70% off deals on over 300,000 listings. From there, users can choose to checkout as a guest or create an account and then redeem the purchase made by showing the QR code Groupon sends via email and in-app, to the business from which the users made the purchase.

Some of Groupon’s competitors include Honey, RetailMeNot, Ibotta, Swagbucks, Rakuten, and other coupon discount sites.

Groupon App in Apple App Store | Groupon Business Model | How Does Groupon Make Money?
Source: Apple App Store | Groupon

How does Groupon make money?

According to page 29 of Groupon’s Q2 2021 Form 10-Q, the company attracts more than 25 million active customers to its marketplace. As well as facilitating $2.62 billion of gross billings in 2020.

So how does Groupon make money off of all those active customers and transacted gross billings?

Below is a breakdown of how much money Groupon makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 2 ways of how Groupon makes money (in 2021):

Groupon has a revenue model that makes money in two (2) ways – commissions and product sales.

#1. Merchant Commissions

Groupon makes a little less than half its money from merchant commissions. In fact, $643.65 million or 45.4% of Groupon’s total revenue came from merchant commissions in 2020.

As noted above, Groupon facilitated $2.62 billion worth of sales for merchants on the marketplace in 2020. Of which, they receive a commission on each transaction.

Groupon Commission Rate:

  • 4% to 30% commission (depending on the category)
Groupon Commission Rate | Groupon Business Model | How Does Groupon Make Money?
Source: Groupon

Note: You can see the full list of Groupon’s commission rates by category, here.

#2. Product Revenue

The other half of how Groupon makes money is through product sales directly through their marketplace. Which, generated the remaining $773.2 million or 54.6% of Groupon’s total revenue in 2020.

Groupon is not as transparent with their product revenue and how much they make off each product sale as they are with their merchant commission rates, as laid out above.

According to page 39 of Groupon’s 2020 Form 10-K, the company recognizes product revenue as “sales of first-party Goods inventory. [Groupon’s] product revenue from these first-party transactions, which are direct sales of merchandise inventory, is the purchase price received from the customer.”

Note: 54.6% of Groupon’s total revenue came from product sales in 2020.

Groupon’s Subsidiaries, Acquisitions, and Exits

To date, Groupon, Inc. has made a total of 42 acquisitions, 8 investments, 3 lead investments, and 1 successful exit.

Groupon Acquisitions
Source: Crunchbase

Groupon’s profit and revenue

In 2020, Groupon reported $1.42 billion in revenue.

Note: Because Groupon, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Groupon’s publicly released financial reports, including annual reports, through Groupon’s investor section on their website.

What is the Groupon business and revenue model?

Groupon makes money through a few revenue models that they combine within their company, they are:

  • Commission based business model
  • Transaction based business model
  • Mergers & acquisitions (M&A) business model

Groupon’s funding and market cap

According to Groupon’s Crunchbase profile, Groupon has raised $1.4 billion over 8 rounds and has a market cap of $677.59 million as of October 2021.