Groupon

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all of the information you should consider in making your investment decision. Before investing in our Class A common stock, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes and the information set forth under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," in each case included elsewhere in this prospectus. Except where the context requires otherwise, in this prospectus the terms "Company," "Groupon," "we," "us" and "our" refer to Groupon, Inc., a Delaware corporation, and where appropriate, its direct and indirect subsidiaries.

GROUPON, INC.

Groupon is a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount. Traditionally, local merchants have tried to reach consumers and generate sales through a variety of methods, including the yellow pages, direct mail, newspaper, radio, television and online advertisements, promotions and the occasional guy dancing on a street corner in a gorilla suit. By bringing the brick and mortar world of local commerce onto the internet, Groupon is creating a new way for local merchants to attract customers and sell goods and services. We provide consumers with savings and help them discover what to do, eat, see and buy in the places where they live and work.

We started Groupon in November 2008 and believe the growth of our business demonstrates the power of our solution and the size of our market opportunity:

•

We increased our revenue from $3.3 million in the second quarter of 2009 to $644.7 million in the first quarter of 2011.


•

We expanded from five North American markets as of June 30, 2009 to 175 North American markets and 43 countries as of March 31, 2011.


•

We increased our subscriber base from 152,203 as of June 30, 2009 to 83.1 million as of March 31, 2011.


•

We increased the number of merchants featured in our marketplace from 212 in the second quarter of 2009 to 56,781 in the first quarter of 2011.


•

We sold 116,231 Groupons in the second quarter of 2009 compared to 28.1 million Groupons in the first quarter of 2011.


•

We grew from 37 employees as of June 30, 2009 to 7,107 employees as of March 31, 2011.

Each day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Consumers also access our deals directly through our websites and mobile applications. A typical deal might offer a $20 Groupon that can be redeemed for $40 in value at a restaurant, spa, yoga studio, car wash or other local merchant. Customers purchase Groupons from us and redeem them with our merchants. Our revenue is the purchase price paid by the customer for the Groupon. Our gross profit is the amount of revenue we retain after paying an agreed upon percentage of the purchase price to the featured merchant.

Our Advantage

Customer experience and relevance of deals. We are committed to providing a great customer experience and maintaining the trust of our customers. We use our technology and scale to target relevant deals based on individual subscriber preferences. As we increase the volume of transactions through our marketplace, we increase the amount of data that we have about deal performance and customer interests.

This data allows us to continue to improve our ability to help merchants design the most effective deals and deliver deals to customers that better match their interests.

Merchant scale and quality. In the first quarter of 2011, we featured deals from over 56,000 merchants worldwide across over 140 categories of goods and services. Our salesforce of over 3,500 sales representatives enables us to work with local merchants in 175 North American markets and 43 countries. We draw on the experience we have gained in working with merchants to evaluate prospective merchants based on quality, location and relevance to our subscribers. We maintain a large base of prospective merchants interested in our marketplace, which enables us to be more selective and offer our subscribers higher quality deals. Increasing our merchant base also increases the number and variety of deals that we offer to consumers, which we believe drives higher subscriber and user traffic, and in turn promotes greater merchant interest in our marketplace.

Brand. We believe we have built a trusted and recognizable brand by delivering a compelling value proposition to consumers and merchants. A benefit of our well recognized brand is that a substantial portion of our subscribers in our established markets is acquired through word-of-mouth. We believe our brand is trusted due to our dedication to our customers and our significant investment in customer satisfaction.

Our Strategy

Our objective is to become an essential part of everyday local commerce for consumers and merchants. Key elements of our strategy include the following:

Grow our subscriber base. We have made significant investments to acquire subscribers through online marketing initiatives. Our subscriber base has also increased by word-of-mouth. Our investments in subscriber growth are driven by the cost to acquire a subscriber relative to the profits we expect to generate from that subscriber over time. For example, we spent $18.0 million in online marketing expense to acquire North American subscribers in the second quarter of 2010 and generated $61.7 million in gross profit from this group of subscribers in the four quarters ended March 31, 2011. See "Business—Subscriber Economics." Our goal is to retain existing and acquire new subscribers by providing more targeted and real-time deals, delivering high quality customer service and expanding the number and categories of deals we offer.

Grow the number of merchants we feature. To drive merchant growth, we have expanded the number of ways in which consumers can discover deals through our marketplace. For example, to better target subscribers, in February 2011, we launched Deal Channels, which aggregates daily deals from the same category. We adjust the number and variety of products we offer merchants based on merchant demand in each market. We have also made significant investments in our salesforce, which builds merchant relationships and local expertise. Our merchant retention efforts are focused on providing merchants with a positive experience by offering targeted placement of their deals to our subscriber base, high quality customer service and tools to manage deals more effectively.

Increase the number and variety of our products through innovation. We have launched a variety of new products in the past 12 months and we plan to continue to launch new products to increase the number of subscribers and merchants that transact business through our marketplace. As our local e-commerce marketplace grows, we believe consumers will use Groupon not only as a discovery tool for local merchants, but also as an ongoing connection point to their favorite merchants.

Expand with acquisitions and business development partnerships. Since May 2010, we have made 13 acquisitions and we have entered into several agreements with local partners to expand our international presence. We have also signed partnership agreements with companies such as eBay, Microsoft, Yahoo and Zynga, pursuant to which these partners display, promote and distribute our deals to their users in exchange for a share of the revenue generated from our deals. We intend to continue to expand our business with strategic acquisitions and business development partnerships.

Our Metrics

We measure our business with several financial metrics. The key metrics are gross profit, adjusted consolidated segment operating income, or Adjusted CSOI, and free cash flow. Adjusted CSOI and free cash flow are non-GAAP financial measures. See "—Summary Consolidated Financial and Other Data—Non-GAAP Financial Measures" for a reconciliation of these measures to the most applicable financial measures under GAAP.

We believe gross profit is an important indicator for our business because it is a reflection of the value of our service to our merchants. In 2010 and the first quarter of 2011, we generated gross profit of $280.0 million and $270.0 million, respectively.

We believe Adjusted CSOI is an important measure of the performance of our business as it excludes expenses that are non-cash or otherwise not indicative of future operating expenses. In 2010 and the first quarter of 2011, we generated Adjusted CSOI of $60.6 million and $81.6 million, respectively.

We believe free cash flow is an important indicator for our business because it measures the amount of cash we generate after spending on marketing, wages and benefits, capital expenditures and other items. Free cash flow also reflects changes in working capital. In 2010 and the first quarter of 2011, we generated free cash flow of $72.2 million and $7.0 million, respectively.

Our Risks

Our business is subject to a number of risks of which you should be aware before making an investment decision. These risks are discussed more fully under the caption "Risk Factors," and include but are not limited to the following:

•

we may not maintain the revenue growth that we have experienced since inception;


•

we have experienced rapid growth over a short period in a new market we have created and we do not know whether this market will continue to develop or whether it can be maintained;


•

we base our decisions regarding investments in subscriber acquisition on assumptions regarding our ability to generate future profits that may prove to be inaccurate;


•

we have incurred net losses since inception and we expect our operating expenses to increase significantly in the foreseeable future;


•

if we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed;


•

if we fail to retain existing merchants or add new merchants, our revenue and business will be harmed;


•

our business is highly competitive and competition presents an ongoing threat to the success of our business;


•

if we are unable to recover subscriber acquisition costs with revenue and gross profit generated from those subscribers, our business and operating results will be harmed;


•

if we are unable to maintain favorable terms with our merchants, our gross profit may be adversely affected; and


•

our operating cash flow and results of operations could be adversely impacted if we change our merchant payment terms or our revenue does not continue to grow.

Corporate Information

Our principal executive offices are located at 600 West Chicago Avenue, Suite 620, Chicago, Illinois 60654, and our telephone number at this address is (312) 676-5773. Our website is www.groupon.com. Information contained on our website is not a part of this prospectus.

Groupon®, Groupon NOW, CityDeal, Grouspawn and the Groupon logo are trademarks of Groupon, Inc. in the United States or other countries. This prospectus also includes other trademarks of Groupon and trademarks of other persons.

THIS IS THE END OF A COMPOSITION COMPONENT TOC_END