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The History of Groupon

May 30, 2014 by · Leave a Comment 

This article was written by Samuel Phineas Upham

Groupon is a daily-deal website that has been both universally praised and scorned for its dealings. The idea began in 2006, when Andrew Mason was attempting to get out of a cell phone contract. At the time, Mason was working on his venture “The Point.” He was headed toward failure and scrambling to cut costs and salvage what he could from the business.

The goal of The Point was to help organizations build their fundraising process into something more efficient. This early form of Kickstarter outlined what the founders called “the Tipping Point,” or the amount of money it would take to actually get a plan off the ground. This helped to alleviate the issue of giving money to a cause that would not produce, and it also helped donators see that they were not alone during this process.

Unfortunately, The Point couldn’t get to the point.

It was on the heels of that failure that Mason noticed something crucial: the most successful campaigns gave the contributors buying power.

So Mason combined the idea of the tipping point with group buying power to create Groupon. The site would feature incredible deals, but those deals would only kick in if there were a specified number of users who participated in it.

Mason managed to grow the customer base aggressively by allowing consumers to sign up for a newsletter that broadcasted future events. The belief was that users would find a deal they wanted and be more active than those who were forced to check the site every day.

However, since Groupon went public the company stock has been a disaster. The email list stopped being productive for the company since Google’s changes to Gmail, and it is currently struggling to turn a profit.

Samuel Phineas Upham

About the Author: Samuel Phineas Upham is an investor at a family office/hedgefund, where he focuses on special situation illiquid investing. Before this position, Samuel Phineas Upham was working at Morgan Stanley in the Media & Technology group. You may contact Samuel Phineas Upham on his Twitter page.

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