GrouponI always wondered. How did a startup like Groupon grow to reach a market value of $15 billion -yes you read that right- in only three years of operation and a 2010 estimated revenue of $350 million and magically creating the fastest growing company ever. It’s simple. Creativity.


Groupon is a website that offers one group coupon or “Groupon” every day at each of its localized websites. They offer a daily deal with a discount usually between 50% and 90%, the deal becomes valid when a predefined number of users buy the deal. Users benefit from the discount, retailers get more customers, and Groupon takes its cut and everyone is happy. Plain simple.


But really. How did it work? I believe the three main factors that made this work are timing, targeting, and social power.


Timing

Groupon launched in late 2008; November to be more specific. Does that period of time remind you of anything? Exactly. Recession.


Late 2008 represented the peak of the economic chaos. People were being laid off and companies were -and still- applying tight budgets to minimize expenses. For all the known reasons, customer purchasing power declined dramatically and businesses lost a large portion of their customer base. Groupon innovated a great business model giving businesses a chance to get more customers leading to higher sales figures. And in the other hand, it provided customers with great deals offering them more than 50% of discount. They both benefited at times when they needed it the most and are still benefiting as the recession is technically in it’s final stages but the whole world is still suffering its impact.


Targeting

Young educated females. 68% of Groupon users are of age between 18-34 years old, 80% are with either undergraduate or graduate degree, and 77% are females. Yes 77% are females! Groupon is playing it right. Focused and clear targeting on a segment with great purchasing power. Females in general like attention and services focused on them.


Groupon mainly used Facebook for its aggressive advertising campaign to target the aforementioned demographics. I’m sure most of Facebook users have came across at least one Groupon ad.


Social Power

Word of mouth was one of the biggest factors that led Groupon to its impressive success. They created a buzz on Facebook, Twitter, and other social media especially when they turned down Google’s $6 billion acquisition offer. Groupon is also implementing a referral system offering $10 when you refer users and they do a purchase. The fact that a minimum number of purchases should be achieved for a Groupon deal to go through, along with the big countdown timer of deal expiry, has created a sense of urgency for users and encouraged them to refer more friends. And of course more $10 credits are earned.


Groupon is widely reachable and serving customers in major geographic markets providing localized deals in around 200 cities in the U.S. only, in addition to its international presence in countries like Canada, Brazil, Germany, Greece, France, the Netherlands, Belgium, the United Kingdom, Italy, Portugal, Spain, Japan, Poland, Turkey, Mexico, Peru, Chile, Colombia, Sweden, Argentina and Romania.


It is worth mentioning that hundreds of clones are surfacing all over the web providing identical services. GoNabIt is an example of a successful clone present in the Middle East and currently operating in the United Arab Emirates, Jordan, Kingdom of Saudi Arabia, Kuwait, and Lebanon. It’s ridiculously obvious how they are copycatting Groupon in each tiny detail. They are even offering exactly the equivalent of $10 in all countries as a reward in their referral system -same as Groupon- which is equal to AED 37 in UAE as an example. It’s sad that our region lacks genuine creativity.