Andrew Mason is the founder of Groupon, an Internet company that has changed the way that coupons are targeted to consumers and redeemed. Mason is young, too – under 30. Groupon has nearly 10,000 employees, a negative bottom line since it began and a troubled IPO that made Mason a billionaire. Building a company, taking it public before it ever earned any revenue and becoming a billionaire in just three years may mean that Mason is eccentric, but as goofy as suggested by 60 Minutes, no!
Groupon was birthed by a website started by Mason in 2007 called Thepoint.com. On this site people could sell something or get a group to do something but only when a certain number of people signed up on the site. Once the required number of people signed up, the tipping point was reached and the campaign or event was on.
Mason started Thepoint at the behest and financial inducement of venture capitalist Eric Lefkofsky, who paid Mason a million dollars to drop out of graduate school and come to Thepoint.com. Mason did so, and a year later Groupon was started more as a side business – but with a pitch advertisers could not resist.
The pitch is to entice urbanites who are faced with a variety of goods and services to sort through things available in their city and concentrate on a single activity or service source. Mason leveraged Thepoint.com’s infrastructure and client list. Each day in many cities throughout the USA subscribers are given a deal of the day to accept or reject. Deals range from a discount of a minimum of 50 percent to as high as 90 percent. Before a deal can be made available to buyers it much reach a stated minimum that is set by the advertiser; once met, the deal is on.
According to Mason, the philosophy that pushes Groupon is that there are often too many choices for the urbanite. By focusing on a single “deal” it is easier for folks to make a decision. The deal is described in a light-hearted way that makes both the location and their goods and services desirable. The icing on the cake to many is the stated value. Bold letters declare – 71% Savings, Over 125 bought, the deal is on!
The almost snarky writing and outstanding discounts usually attract enough buyers for the deal to go on. If not, those who purchased an unsuccessful deal are refunded their money.
When preparing to go public, Mason was found to be keeping the books incorrectly. In fact, there was fear the SEC would slam the door as profits were overstated by tens of millions of dollars and expenses were, too. Mason claims no fraud was intended. He had Groupon’s books redone to comply with SEC regulators and the IPO was on. Shares were issued at $34 per and the value has fluctuated up and down in that range. Mason, however, became a billionaire.
Advertisers who have used the site give mixed reviews. The biggest complaint is that someone who comes to a location using a Groupon deal either does not come back or always wants a deal. Others say they lost money as the deal was too well subscribed. This criticism is unfair. Groupon’s task is to get new customers in the door; the company’s job is to turn a new customer or client into a repeat client.
Groupon does have great name recognition and is often touted by users in chat and on Facebook and Twitter. The concept is so intriguing that Google made a failed attempt to purchase Groupon before the IPO. Google will be introducing their own online deals, and already there are competitors such as Living Social and Deal Chicken. Other deal sites are aggressive in courting customers with tactics such as a coupon code. No one knows how long Groupon will be the king of the hill or if it will remain at the top of this new marketing phenomenon that Mason created.