Group Coupons Spread the Savings

(Post: English)
"By now everyone knows the power of the crowd in creating goods and services. As Andrew Mason, 29, has discovered, the crowd can be a pretty big force when it comes to buying, too."

As founder of the Point, a social fundraising Web site, Mason was well-versed in aggregate spending.

In November 2007, that led him to start a second Chicago business, Groupon, a site where people sign up for a daily coupon via e-mail.

The discounts are usually good pretty good, averaging around 65% off from companies as diverse as skydiving and restaurants in 18 major cities, such as Chicago, New York, and Seattle.

The catch: The coupon doesn't activate until a minimum number of people have pledged to buy.

Customers enter purchase information, but no one is actually charged until the minimum is met, so there are no refund hassles.

It's free for the business offering the deal, and the guaranteed revenue offsets the juicy discount.

Groupon collects all the money, takes a cut that varies from client to client, and passes the rest of the money along to the offering business.

CEO Mason says businesses are thrilled with the exposure of targeted e-mails and are reporting increased revenues.

When the Art Institute of Chicago offered a Groupon on July 31, for instance, 5,000 people purchased a yearlong membership - or 5.9% of the total 85,000 in the museum's history. Moreover, nearly 98% were first-time members.

Since Groupon's start, some 850,000 people have signed on, nearly 250,000 in the last two months alone.

The 103-employee company is already pulling a profit, Mason says, and expects to clear $100 million in revenue next year.

Source: BusinessWeek