Groupon is an unlikely candidate for a list of companies that have their best years behind them. One reason Groupon belongs on this list is its stock price has fallen by well over 70% since its November 2011 IPO. Groupon’s primary problem is that the online coupon business, in which it was the major pioneer, is a commodity business now. It has not been terribly difficult for Amazon and other large retailers like Walmart to enter the sector.
Groupon was the most significant player in its industry after beginning operations in 2009, when it posted revenue of only $15 million. That number rose to over $1.6 billion last year, but Groupon paid dearly for that growth. The company lost $675 million over that same two-year period before interest and taxes. Groupon’s revenue grew 89% to $559 million in the most recently reported quarter. But expansion continued to come at a cost. Groupon’s bottom line grew from a loss of $12 million in the same quarter last year to one of $147 million.
Groupon’s new competitors replicated most of its tactics very quickly. LivingSocial, the rival most like Groupon in terms of its business model, had 7.2 million unique visitors last year to Groupon’s 11 million, according to online industry research firm Comscore. LivingSocial has financial support from Amazon. Google has entered the sector with a product called Google Offers. Well-regarded industry website VentureBeat lists 33 direct competitors to Groupon, and none is a large corporation. The Chicago Sun-Times, one of the two daily papers in the city where Groupon is headquartered, summed up Groupon’s difficult challenges, “Groupon has been weighed down by high marketing and staffing costs and faces increasing competition from the likes of Amazon.com and Living Social, among hundreds of other local deals sites.” Even the hometown press has nothing positive to say about the company.
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