Groupon has experienced rapid subscriber, customer, and revenue growth since launching in late 2008. By the first quarter of 2011, Groupon had over 83 million subscribers and $655 million in quarterly revenue, up significantly from prior periods. However, costs have also grown rapidly, accounting for over 100% of revenue in Q1 2011. Key metrics like the average deal price, revenue per merchant, and marketing costs per merchant have fluctuated over time. Most of Groupon's 7,000+ employees are international and work in sales roles.

1. Analysis of the key operating
metrics published in the
Groupon S-1 Filing
Report Author: Martin New
Prepared: 19/07/2011
CONTACT
Prepared by Martin New Page 1

2. Summary of Key Numbers:
 Subscribers: 83.1 million - up from 3.4 million in March 2010 (2,320%)
 Customers: 15.8 million – up from 874,000 in March 2010 (1,708%)
 Subscriber acquisition cost: 30$
 Customer conversion rate: 19%
 Featured Merchants: total 125,765 : 56,781 in Q1 2011 – up from 2,903 in Q1 2010
(1856%)
 Merchant pool (IE deals in pipeline): Currently 40,000 (up from 15 in March 2009)
 Groupons sold: 60 million total. 28.1 million in Q1 2011 – up from 1.8 million in Q1
2010 (1,496%)
 Revenue: $713 million in Yr end Dec 2010 – up from $30.5 million in 2010 (2,241%)
 Average Revenue per merchant: $11,000
 Average Groupon price: $23
 Average revenue per Subscriber: $14.10 in 2010 vs $7.76 in Q1 2011
 Groupon:Merchant Revenue split: currently at 60:40 in Merchants favor
 Gross Profit: $280 million in Yr end Dec 2011 – up from $11 million in 2010
(2,462%)
 Net Income/Loss from operations: Loss of $114 million in Q1 2011 vs income of $8.7
million in Q1 2010
 Marketing Spend: Grew by +5,000% in Q1 2011 vs Q1 2010 ($208 million)
 Selling, Gen and Admin: Grew by 2,300% in Q1 2011 vs Q1 2010 ($179 million)
 Total operating expenses: accounted for 118% of revenue in Q1 2011 vs 80% in Q1
2010 ($762 million in Q1 2011 – up 2,000%)
 Employees: 7,107 (76% International)
 Revenue per sales employee: North America - $450,000 vs International - $120,000
 Geographical coverage: 43 countries and 175 North American Markets
 International vs North America: International operations account for 58% of revenue
Prepared by Martin New Page 2

3. CHART INDEX
Chart Page
Groupon Revenue vs Gross Profit Trend 4
Subscribers, Cummulative Customers vs Groupons sold 4
Quarterly growth of Groupon Subscribers and Customers 5
Percent of Subscribers purchasing Groupons 5
Groupons Purchased by Customer and Subscriber 6
Acquisition Cost vs Revenue per subscriber 6
Average Groupon Deal Price 7
Global Sales by Category Q1 2011 (Volume based) 7
Sales Cost and Customer Acquisition vs Revenue per Featured Merchant 8
Average Revenue per Merchant 8
Gross Profit to Cost of Revenue Trend 9
Operational Costs as a Percentage of Revenue 9
Employee Head Count by function and Segment 10
Revenue per Sales Employee Q1 2011 (North America vs International) 10
Merchants per Sales Employee Q1 2011 (North America vs International) 11
North America vs International Revenue 11
Marketing Spend Share North America vs International 11
4 City Comparison: Subscriber trend 12
4 City Comparison: Cumulative Customer trend 12
4 City Comparison: Customer share of Subscribers 13
4 City Comparison: Groupons purchased per subscriber 13
4 City Comparison: Average Price per Groupon 14
4 City Comparison: Groupons Sold per Merchant 14
4 City Comparison: Average Revenue per Featured Merchant 15
Prepared by Martin New Page 3

4. Revenue and Gross Profit
Groupon has experience tremendous revenue growth within the 30 months of trading. In
the first quarter of 2011, the company generated nearly $655 million in sales (up from $44
million a year earlier. Gross profit in the last quarter stood at $270 million. Groupon classify
Gross Profit as Revenue (receipts from Groupon sales) less Cost of Revenue (payment made
to merchants).
644,728
Groupon Revenue vs Gross Profit Trend
700,000
($000's)
600,000
396,600
500,000
270,000
400,000
185,231
300,000
153,309
87,298
200,000
72,287
44,236
34,373
19,985
16,920
9,998
5,641
3,996
3,301
100,000
1,209
252
83
0
March June Sept Dec March June Sept Dec March
Revenue Gross Profit
Subscriber and Customer Base
Groupon Key Metrics
Subscribers, Cumulative Customers vs Groupons sold
Acquired 1.9 million subscribers
May 2010 with CityDeal acquisition
March June Sept Dec March June Sept Dec March
Subscribers 152,203 627,051 1,807,278 3,434,610 10,445,521 21,369,608 50,583,805 83,100,006
Cummulative Customers 6,840 43,014 153,471 375,099 874,017 2,379,611 4,623,267 9,031,807 15,803,995
Groupons Sold 27,221 116,231 340,471 764,869 1,760,398 4,062,458 8,237,733 16,235,481 28,094,743
Prepared by Martin New Page 4

5. As at March 2011, Groupon had acquired 83.1 million subscribers, of which 15.8 million had
purchased 1 or more Groupons (19% conversion). Since launch, 60 million Groupons have
been sold.
Quarterly growth of Groupon Subscribers and Customers
32,516
29,214
35,000
Thousands
30,000
25,000
20,000
10,924
15,000
7,011
6,772
10,000
4,409
2,244
1,627
1,506
1,180
5,000
499
475
222
152
110
36
7
0
March June Sept Dec March June Sept Dec March
Additional Subscribers Additional customers
When broken down by quarter, Groupon saw subscribers increase by an impressive 18.3
million in Q4 2010 (167% growth), vs a growth in additional unique subscribers of 2.2
million (96% growth). The chart below shows the gradual decline in the rate of conversion
of total subscribers.
Percent of Subscribers purchasing Groupons
28.3%
29.0%
27.0% 25.4%
24.5%
25.0%
22.8%
23.0% 21.6%
20.8%
21.0%
19.0%
19.0% 17.9%
17.0%
15.0%
June Sept Dec March June Sept Dec March
Note: The conversion rate is likely to be less than shown since Groupon do not include “guest” purchases in their
subscriber numbers.
Prepared by Martin New Page 5

6. Groupon Key Metrics
Groupons Purchased by Customer and Subscriber
4.5
4.0
4
3.5
3 2.7
2.5 2.2
2.0 2.0
2 1.7 1.8 1.8 1.8
1.5
1 0.8
0.5 0.4 0.5 0.4 0.4 0.3 0.3
0.5
0
March June Sept Dec March June Sept Dec March
Groupons per subscriber ratio Groupons per Customer ratio
The average number of Groupons purchased per subscriber has held steady at around 2
over the last 18 months.
Average acquisition cost per new customer is 30$ (and rising) vs revenue of 14$ per
subscriber (and falling). This is particularly high for non-recurring customers. Netflix SAC
(Subscriber Acquisition Cost) for example is now at 14$.
Acquisition Cost vs Revenue
per subscriber
$35.00 $30.40 $30.74
$30.00
$25.00
$20.00 $16.86
$14.10 $12.88
$15.00 $12.12
$10.00 $7.99 $7.76
$5.00
$0.00
2009 2010 2010 2011
Yr end Dec 3mth End March
Acquisition cost per new Customer Revenue per Subscriber
Prepared by Martin New Page 6

7. Groupons
To-date Groupon has sold around 60 million Groupons for a total revenue of almost $1.4
Billion. The average price of a Groupon has held steady at around 23$ for the past 18 mths.
Average Groupon Deal Price
$35
$29
$28
$30
$25 $24
$25 $22 $22 $23
$21
$20
$15
$9
$10
$5
$0
March June Sept Dec March June Sept Dec March
Something that was not covered in the S-1 filing was the share by deal type that Groupon
has been offering. As competition heats up and deal sites start to target specific niche
verticals, it is important to understand where Groupon is facing the toughest competition.
The only information provided by Groupon is that they have offered over 140 different types
of businesses, activities and services that they classify into 6 broad categories. An
understanding of the trend, geographical share by each category may be gleaned from 3rd
party aggregators like Yipit that are tracking the market at this level, with the added
advantage of being able to compare the profile by daily deal provider.
Global Sales by Category
Q1 2011 (Volume based)
Services, 11%
Health and Beauty,
31%
Activities, 15%
Events, 11%
Food and Drink,
23%
Prepared by Martin New Page 7

8. MERCHANTS
Turning our attention to the merchant metrics, the chart below shows that the cost of
acquiring merchants has increased by almost 70% between yr end Dec 2009 and 2010, and
on average is now costing Groupon around $7,500 in sales and marketing activities per
merchant.
Sales Cost and Customer Acquisition vs Revenue per
Featured Merchant
$12,000 $11,306
$10,761
$10,000
$8,000 $7,499
$6,000
$4,455
3,971
$4,000 $3,529
$2,767
1,688
$2,000
$0
2009 2010
Sales Cost Marketing Total Sales/Marketing Revenue
The average revenue per featured merchant has fluctuated over time. Of key importance is
that Groupon attract varied and high quality merchants. Another factor affecting average
merchant/deal revenue is the fact Groupon now offer multiple daily deals each day for each
city. While this provides for greater consumer options/targeting, it may dilute and weaken
sales for each featured merchant. Groupon has recently launched Groupon Getaways that
will likely have a higher average price point and may help push the average Groupon ticket
price higher.
Average Revenue per Merchant
$15,571
$15,238
$18,000
$13,069
$16,000
$11,355
$11,299
$10,292
$14,000
$9,894
$9,127
$12,000
$10,000
$8,000
$3,405
$6,000
$4,000
$2,000
$0
March June Sept Dec March June Sept Dec March
Prepared by Martin New Page 8

9. It has often been reported that Groupon’s terms with merchants is a 50:50 revenue split. In
fact, the S-1 filing shows that the Cost of Revenue (amount paid to merchants) since
January 2009 has averaged out at 60:40 in favour of the merchant. When analysed by
quarter however, it appears Groupon is managing to negotiate better revenue share over
time, having moved from 67:33 to 58:42 in the last quarter. This trend may prove to be
difficult to maintain given increased competition.
Gross Profit to Cost of Revenue Trend
100%
80%
60% 55% 61% 58% 60%
63% 67% 61% 61%
67%
60%
40%
20% 40% 45% 39% 42% 40%
37% 33% 39% 39%
33%
0%
March June Sept Dec March June Sept Dec March Average
Gross Profit Cost of Revenue
Operational Costs
Groupon increased marketing spend during 2010, spending $263 million versus just $4.5
million in 2009. Total operational costs in Q1 2011 out stripped revenue by 18% - which
was an improvement on the yr ending December 2010 when costs were running at 30%
above revenue. Selling, general and administration costs have also grown as a percentage
of revenue, while payment to merchants actually improved yr on yr and is currently at 58%
of revenue.
Operational Costs as a Percentage of Revenue
130.5% 118.2%
103.5% 32.8%
27.8%
24.5% 80.6%
36.9% 32.3%
14.9% 16.8%
9.0%
64.1% 60.8% 54.8% 58.1%
Yr 2009 Yr 2010 Q1 2010 Q1 2011
31,548 930,526 35,665 761,876
Cost of revenue Marketing Selling, General and Administrative
Prepared by Martin New Page 9

10. Groupon has hired aggressively since launch and now has over 7,000 staff around the
world. Over 75% are based outside North America. Being a sales/marketing company it is
no surprise that 50% of employees work in sales and are a critical factor in the business. As
Groupon expands into new markets, the sales force will increase in proportion.
Employee Head Count by function and Segment
38% 36%
47%
12% 11%
15% Corporate & Operational
50% 54% Customer Service
38%
Sales
Total North America International
7107 1724 (24%) 5383 (76%)
In Q1 2011, the sales team in North America were far more profitable than their
International counterparts, generating nearly 4x the revenue and being responsible for
nearly 3x as many merchants.
Revenue per Sales Employee Merchants per Sales Employee
Q1 2011 Q1 2011
$450,676 31
16
$181,307 12
$119,803
Total North America International Total North America International
NORTH AMERICA VS INTERNATIONAL
Groupon is currently operating in 43 countries. International operations commenced in May
2010 with the acquisition of CityDeal who offer deals in 80 cities across 16 European
countries. In the quarter ending March 2011, International operations accounted for 58% of
revenue (up from 37% in the year ending December 2010).
Prepared by Martin New Page 10

11. North America vs International Revenue
($000's)
448,317
346,831
297,897
265,048
Yr end Dec 2010 3 mths end March 2011
International North America
Groupon has invested heavily on marketing with the International segment accounting for
62% of spend, representing 37% of revenue generated from International operations
(compared to 26% revenue in North America).
Marketing Spend Share
North America vs International
3 mths end March 2011
26.4%
% of revenue
37.3%
North America
International
37.8%
% share
62.2%
An assumption made by Groupon is that as the market matures, marketing spend will
decrease. Unfortunately the Groupon S-1 does not provide a breakdown of marketing spend
by quarter and segment to see if Groupon have started to pull back on North American
marketing spend. If not, and they continue to push into new markets, marketing expense
will continue to grow. Leveraging social media is considered an important aspect of the daily
deal space (hence often referred to as social group buying). If Groupon cut back on
marketing spend, they will need to ensure that subscribers/customers continue to share
deals using the social media tools available.
Prepared by Martin New Page 11

12. Case Studies: Chicago, Boston, Berlin and London
Although only limited data is available in the S-1 filing for each of the 4 cities, it is
interesting to make a comparative performance study of the key metrics provided.
Each city is showing consistent subscriber growth over time. London has grown quickly in
subscriber acquisitions but is falling short on converting subscribers into paying customers.
Although Berlin has the lowest subscription base of the 4 reviewed, it has still gained more
subs than either Chicago or Boston did after 1 year of activity.
4 City Comparison
Subscriber trend
June Sept Dec March June Sept Dec March
Boston 17,069 56,904 122,375 194,615 285,615 412,467 561,064 778,936
Chicago 36,891 62,038 147,882 268,056 492,826 750,118 1,102,146 1,504,978
Berlin 92,500 152,800 261,200 396,000
London 159,156 423,660 993,662 1,602,968
Despite impressive acquisitions of subscribers, it is important to see how many become
paying customers. Despite London achieving 1.6 million subscribers, to date only 145,000
have purchased a Groupon (a conversion of just 9% - compared to 37%, 35% and 18% for
Chicago, Boston and Berlin respectively).
4 City Comparison
Cumulative Customer trend
June Sept Dec March June Sept Dec March
Boston 8,545 20,953 36,634 62,610 94,617 142,930 197,961 272,548
Chicago 19,003 43,023 74,237 125,403 184,074 285,987 409,746 552,712
Berlin 9,072 23,007 40,992 69,412
London 10,284 34,182 75,897 144,933
Prepared by Martin New Page 12

13. 4 City Comparison
Customer share of Subscribers
June Sept Dec March June Sept Dec March
Boston 50% 37% 30% 32% 33% 35% 35% 35%
Chicago 52% 69% 50% 47% 37% 38% 37% 37%
Berlin 10% 15% 16% 18%
London 6% 8% 8% 9%
While growing subscriptions is important, Groupon need to address the falling ratio of
Groupons purchased per subscriber. Both Chicago and Boston has seen a dramatic fall from
1.5 Groupons per subscriber to around 2 subscribers per Groupon sold. London has not yet
managed to grow purchase rates above 1 Groupon per 3 subscribers.
4 City Comparison
Groupons purchased per subscriber
June Sept Dec March June Sept Dec March
Boston 1.5 0.7 0.5 0.5 0.5 0.5 0.5 0.5
Chicago 1.3 1.4 1.0 1.0 0.7 0.7 0.6 0.6
Berlin 0.5 0.6 0.5 0.6
London 0.3 0.3 0.2 0.3
Both Boston and Chicago has seen the average price per Groupon fall over time and even
Berlin saw a drop in the last quarter. London however continues to see average Groupon
ticket price climb and has been consistently higher than the other cities analyzed. This is
likely due to the higher cost of living in London, but may also be a result of the category of
deals being offered (eg greater share of high price activities than lower ticket items like fast
food, manicure deals).
Prepared by Martin New Page 13

14. 4 City Comparison
Average Price per Groupon
June Sept Dec March June Sept Dec March
Boston $26.89 $35.00 $31.88 $30.29 $30.13 $26.40 $24.99 $23.96
Chicago $34.11 $35.56 $26.11 $23.93 $26.50 $24.21 $24.89 $22.62
Berlin $21.25 $26.87 $36.12 $26.61
London $34.30 $42.55 $45.42 $49.99
Although the quantity sold and revenue generated for each featured merchant is dependent
on numerous factors, both North American cities have seen average Groupon sales per
merchant fall. Berlin and London are still witnessing growth however.
4 City Comparison
Groupons Sold per Merchant
June Sept Dec March June Sept Dec March
Boston 394 533 649 871 1,316 1,541 994 851
Chicago 700 917 1,140 1,829 2,235 2,322 1,445 1,253
Berlin 436 333 411 551
London 486 547 809 931
Both Chicago and Boston saw average revenue per merchant rise in the first 15 months of
activity, but each has since seen average deal revenue fall back to December 2010 levels.
Prepared by Martin New Page 14

15. London is currently outpacing the other 3 (generating $46,500), but still lags behind
Chicago at its peak mid-2010 with an average deal value of $60,000.
4 City Comparison
Average Revenue per Featured Merchant
June Sept Dec March June Sept Dec March
Boston $10,606 $18,667 $20,690 $26,364 $39,655 $40,690 $24,825 $20,395
Chicago $23,881 $32,609 $29,771 $43,750 $59,236 $56,223 $35,957 $28,327
Berlin $9,259 $8,955 $14,851 $14,663
London $16,667 $23,276 $36,735 $46,528
Prepared by Martin New Page 15

16. Prepared by Martin New Page 16

17. Some outstanding questions
 Email Subscription churn/open rates?
With a low conversion rate, it would be beneficial to know how many people
are actually opening the emails Groupon send out each day. Also of
importance is to get a fix on the churn (unsubscribes) that is occurring over
time.
 What is the trend in fraud/refund rates?
Groupon currently hold 4% of revenue to cover fraud and refund. The
question is: how does this match up with actual fraud/refund rates and how is
it trending over time.
 Revenue by deal type?
Given the wide value and volume splits that occur between different daily deal
categories, plus the growth in niche vertical deal sites, an understanding of
Groupon’s deal mix would give better insight into the company’s business
model.
 Voucher redemption rates and timeline of redemption?
Since Groupon’s international merchant payment policy is to pay merchants
upon coupon redemption, any change in either the breakage or time between
customers purchasing and redeeming Groupons will affect cash flow.
Additionally, should legislation extend legal redemption terms on coupons.
 Repeat customer trends
Is Groupon generally appealing to discount hunters. If so, merchants may be
less interested in running daily deals and Groupon customers will likely be
less loyal to a single Daily Deal site.
 Proportion and trend toward national deals?
Groupon has stated that it uses national deals to help build subscriber base
and these deals are likely to be less profitable given the lower margin charged
to merchants.
 What is the share of mentions on Facebook, Twitter etc per subscriber?
Part of the daily deal concept is having consumers share deals with friends,
family and work colleagues – hence the term social group buying. Question is,
are people still sharing deals at the same rate?
CONTACT
Prepared by Martin New Page 17