Groupon Business Model – How does Groupon make money?

What is the best shopping experience? Of Course, it could be getting your favourite product at discounted prices. But wait!!! How do you get to know about discounts? If you’re a shopaholic then you might surely know about deal websites. As there are hundreds of deal websites available online, Groupon is the favourite destination for most of the shoppers. Many shoppers are stealing the deals and availing upto 70% discount on their online purchases.

Let’s dive into Groupon!!!

What is Groupon?

Groupon is the world’s leading deals and coupons website. It was founded in 2008 by Andrew Manson, Eric Lefkofsky and Brad Keywell. The company is connecting millions of customers with e-commerce and local business. These online shopping platforms display vouchers, coupons and discounts on Groupon. Groupon runs profits by implementing traditional business models i.e “being a middleman”.

Simply put, Groupon is the best hyperlocal online destination that is connecting customers to businesses by providing deals and discounts. Whether you’re looking for travel coupons or local deals, look no further than Groupon. The platform is offering the latest deals and coupons from various categories such as fashion, travel, hotel, health, pet supplies and more.

Unbelievable stats of Groupon

  • 1 million merchants worked till the date
  • Founded in 2008
  • More than 200 million people downloaded Groupon app on their devices
  • 38 million active customers
  • Over 1.5 billion groupons sold
  • Over $35 billion saved by customers in North America

Groupon business model

Groupon follows a straightforward business model. It is the marketplace that is similar to popular e-commerce platforms such as Amazon, eBay and Alibaba. On the other hand, it operates pretty differently from other e-commerce marketplaces.

Sounds interesting right? Yes!!!

As already discussed, Groupon is the leading e-commerce marketplace that is connecting millions of customers with local commerce by offering activities, travel, hotel and other services at discounted prices. The company has replaced the traditional method that local and online business has used newspaper, television, yellow pages and radio to promote their products, services and offers.

The value proposition implemented by Groupon is pretty simple. Groupon connects customers and merchants under its platform. Also, Groupon follows various strategies to get customers attracted to the merchant by presenting great deals and discounts.

How does Groupon work?

Groupon’s operating model is straightforward. As mentioned before, it’s the one-stop destination for customers and sellers. The platform is connecting them in a different way and earning good revenue. Sellers are showcasing their offers and coupons. And Customers are availing the latest coupons from online and local stores. Groupon earns revenue from every refereed customer to e-commerce or local business.

For customers

Groupon is one of the popular deals marketplaces that allow customers to explore the latest coupons and offers on millions of online and offer stores. The platform helps customers to save huge bucks on purchased products or services. Groupon is differentiating itself by enhancing the user’s experience by sending personalized emails and displaying target ads. This will let customers save money on their online or offline purchases.

Customers will check the latest offers and coupons on Groupon homepages and merchant pages. According to customer interest, they will pick the offer and proceed to purchase. Whenever a customer finds the perfect deal or coupon code, they click on the offer and copy the respective voucher code. At the same time, they will redirect to the merchant website and redeem the coupon code to grab a discount on their purchases.

For sellers

It’s no surprise Groupon provides amazing value to businesses. As the platform is helping millions of sellers around the globe. The key benefit for sellers is they get access to new and existing customers. If you’re new to the business, connecting with Groupon is worth it for you. The platform brings you new traffic and increases conversion. Whenever a customer redirects to a merchant website and purchases, Groupon will charge a commission on every referred sale.

Sellers are getting amazing advantages from partnering with deals marketplace – Groupon. According to analysis, more than 78% users referred by Groupon are visiting the merchants and placing the order again. Currently, there are over 1 million sellers promoting their latest offers, deals and voucher codes.

Groupon revenue model

Groupon is the leading e-commerce marketplace connecting millions of customers with merchants. The platform is a one-stop destination for the latest coupons and offers. The revenue model is simple and easy. Groupon is made up to showcase deals and offers to its customers and earn profits on every referral. The category-based commission is implemented at Groupon. The commission may vary from one merchant to another. For example, Groupon earns more commission on appliances compared to fashion accessories.

Let’s dive into the topic

Groupon differentiate between 2 types of revenue

  • Service revenue
  • Product revenue

Service revenue

The revenue generated by service is primarily for Groupon. The marketplace earns a great commission on every service.

Groupon works in a straightforward way, it sells services and other goods on behalf of merchants. Simply put, the website will make the savings double for third party merchants by promoting their products and services through offer or voucher code.

Consider, the online or retail purchase is done using digital voucher codes accessed via Groupon. These are likely called card-linked offers. The website earns money through advertising the merchants on their website, blog, social media and newsletter.

Product revenue (goods)

This is something interesting. Apart from advertising other merchants, Groupon is acting as an intermediary between merchant and customer. 

Also, the platform is making money by selling its own products. Whenever a customer purchases the product, their team will get from its warehouse. The fulfilment procedure is managed by Groupon and shipping will be handled by other parties.

There are various types of operating models are implemented by Groupon such as:

  • Platform business model
  • Marketing or advertising model – it includes various payment methods such as pay-per-display, cost-per-click, cost-per-sale and more.
  • E-commerce retail model

For more information, you can check on Groupon website.

How does Groupon make money?

Are you eager to know how Groupon is running a profitable business? How does it make money? Let’s discuss now,

Groupon is earning a good amount of profits by promoting and advertising merchants on its site. Simply put, Groupon website is the middlemen between customers and sellers. They charge a commission on displaying merchants’ offers and referred sales.

Let’s consider if you’re running an “ABC” campaign on Groupon. You would like to promote an offer of 50% discount on the service of $100. Here, you need to sign a contract of 50-50% revenue share. This means you need to pay $25 for Groupon for promoting your offer on its site. As a result, you will earn $25 in every sale.

The commission will depend on marketing tools that are utilized by the seller or merchant. The popular marketing tools are deal of the day, home page, newsletter, advertisement and more.

Source of expenses for Groupon

Cost of acquisition

Acquiring merchants can be a daunting task for the deal website. In fact, this could be probably an expensive task for Groupon. The deal marketplace needs to sign a contract with millions of merchants. The more merchants imply the more revenue for Groupon.

Marketing costs

Acquiring customers is as important as acquiring merchants. With customers any website is useless, it could be a deal website or e-commerce website. Everyone agrees that customers play a vital role in Groupon revenue. Acquiring customers can be costly for Groupon. It includes email marketing tools, advertisements, referral bonuses and more.

General & administrative cost

General and administrative expenditures are pretty higher. As the costs include overall operations of the organization. It includes employee compensation, accommodation, accounting expenses, legal costs and more.

Groupon is running a successful business and generating a good amount of revenue from initial stages. According to the analysis, Groupon has earned more than $2.8 billion in the year 2017. The platform is generating great income by advertising merchant services and products. The revenue is earned on every refereed sale. Currently, Groupon marketplace has generated over $395.6 million in 2020.


Groupon is the best marketplace of latest coupons, vouchers and deals. The platform displays deals from millions of online and local businesses. Groupon showcases ongoing deals and latest offers from various categories that are ranging from flight ticket booking to hotel booking. Millions of customers are using these deals provided on Groupon and save huge bucks. Groupon’s business model is simple and straightforward. The company sells the latest offers, coupons and voucher codes to its customers and earn commission on every referred sale. There will be no fixed cost to sell products or services on Groupon. However, the platform takes an amount of commission from every sale made by the customer. This is called “marketing fees”. According to a recent analysis of 2020, Groupon has earned over $395.6 million by advertising third-party business products or services. Hope you’ve understood how does Groupon make money.

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