2016 Letter to Stockholders

In 2016, Groupon made some of its most significant strides as a public company as we continued to make progress on our path to becoming the daily habit in local commerce.

Local continues to be a vast opportunity. Connecting customers with millions of small businesses around the world — and helping build vibrant and growing communities in the process — continues to be our focus. Few others have the scale or ability to tackle this challenge, and no one has made as much progress in such a short time.

Since inception, Groupon has generated more than $13 billion with well over one million local businesses, and more than 50 million customers continue to trust Groupon to deliver incredible value on the things they do everyday and that make their neighborhoods great.

This is a mission that our more than 7,000 employees around the world take to heart and where we continue to do amazing work.

2016 was also a year of significant transition for Groupon.

Having built one of the largest marketplaces in ecommerce over the past eight years, our overall progress is clear. And, as exciting as that progress has been, I believe we still haven’t realized our full potential. We’ve often simply tried to tackle too many things in this vast space. It’s understandable: when you are pursuing an opportunity like local in real time with no tested blueprint, the potential for distraction is real and significant. Moving into 2016, it was clear that our business needed more focus.

When I took the role of CEO, I set out to bring focus to the business and team; to channel our collective energy and unleash it on four foundational things: streamline and simplify our business, grow customers, reduce empty calories and improve the overall customer experience. We believe these are the core elements to building a thriving business for the long term, and the team produced great results.

In short, we did exactly what we said we’d do. And we exited the year with double-digit North America local billings and — more importantly — gross profit growth.

Streamline and Simplify
Streamline and Simplify

Most significantly, we fundamentally changed how and where we do business. Over time, Groupon had sprawled and the business became increasingly complex. At the beginning of 2015, we operated in 47 countries. This effectively meant running more than 40 companies — companies with their own sales, customer service, finance, operations and editorial teams. Bottom line, we were fighting too many tough battles that weren’t critical to our long-term success.

Over the last 14 months, we challenged our teams to simplify our business and to ensure we were only working in markets where we were poised to win and where we believe there would be strong return on our long term investments. That meant big changes to our operations, as well as our geographic footprint.

After a year of tough decisions and significant restructuring work, our global footprint sits at 15 countries. These are the markets where we believe we can continue to grow great businesses and that will benefit most from our products, scale and expertise.

As we trimmed our global footprint, we also expanded regional and global shared service centers to more efficiently provide core operations and service support for consumers and merchants around the world. These shared service centers are another key way we’re further streamlining our operations and making the business simpler to run while delivering a more consistent experience for customers. It’s also a much more efficient operating model, which is visible in the strong trend of cost improvements we’ve delivered since undertaking these efforts.

We will continue to focus on this area going forward. Running a lean and tight business is now part of our DNA.

Grow Customers
Grow Customers

We also made outstanding progress in growing customers. Groupon has built an incredible brand — one consumers recognize and embrace. It is a tremendous asset. We are also operating in a massive and underserved market where customer scale is critical and where we already have a strong foundation. In 2016, we invested more than $360 million in marketing to truly capitalize on our brand and extend our customer advantage. Over the course of the year, we added more than five million new customers in North America — our most since 2012. In addition, we acquired LivingSocial — one of our original competitors in local — to give us a further way to connect with customers through another strong brand.

As an extension of these efforts, we also launched our first significant offline advertising campaign since 2011 to reacquaint customers with Groupon while demonstrating how the company has evolved from our daily deal roots. Combined with our traditionally strong computational marketing efforts, we were able to effectively and efficiently drive millions of profitable new customers to our marketplace and further bolster our brand.

Expect more great things on this front as we move forward.

Reduce Empty Calories
Reduce Empty Calories

Another key focus for 2016 was reducing empty calories — particularly in our Goods business. As we’ve increasingly focused on gross profit as the best indicator of the overall health of our marketplace, we needed to pay particular attention to our margins. While this is something we track for all our businesses, it is especially important in Goods. Over the past 5 years, our Goods business has been a powerful tool for customer engagement, activation and retention. However, Goods was also too reliant on low margin products that are good for revenue, but contribute little to the bottom line. We are focused on sustained gross profit growth and long-term customer value, and we believe we’re building our businesses to reflect that.

In 2016, we made solid progress ensuring that our Goods operation is a healthy part of Groupon. With improved margins, Goods helped us deliver 10% more incremental gross profit in North America year over year. Further, even as we’ve removed those empty calories, Goods continues to be a tremendous source of Local customer activation, with roughly 40% of Goods buyers also purchasing a Local deal.

As we enter 2017, we believe Goods is healthier, and we’re using it more strategically to fuel long-term marketplace growth.

Improve the Customer Experience
Improve the Customer Experience

Even with a strong brand, amazing local merchants and tens of millions of loyal buyers, the customer experience remains king. Your product has to deliver value, but it also needs to be easy and rewarding to use. Then you have to back it with excellent service and support.

During the course of the year we made real improvements in our customer service levels driving them to industry standards with plans for further gains. We continued to deliver category-leading customer satisfaction ratings and boast a Net Promoter Score of 72 that rates alongside the world’s best brands. This is an excellent foundation from which to build.

We also invested significantly in our mobile experience. Groupon is the top rated retail app in the United States according to Applause and the second most visited retail app in the country — behind only Amazon — according to Comscore. Our app has more than 145 million mobile downloads and more than 60 percent of our transactions occur on a mobile device. We are — and have been — a mobile-first company. It’s now clear that we’re also a leading mobile shopping destination.

At the end of the year we launched a dramatically improved app experience to build on our already-strong mobile history and deliver more of what consumers want. It is as much as 40 percent faster with vastly improved mapping and geolocation, filters, and browse features that make it even easier to find the perfect deal, wherever you are.

We also began attacking one of the biggest friction points at Groupon: voucher expiration. This has been a thorn in customers’ sides since Groupon’s inception. When vouchers expire, no one wins. Customers feel like they’ve lost out on a great deal. Merchants miss out on a new customer. Our new trade-in program allows customers to extend the expiration date of their deals or trade in a recently expired deal for a new one. We believe this is another key investment in a healthy marketplace.

These were all important improvements in the customer experience, but the reality is that our work here is never done. I expect even more gains here in 2017.

The year ahead
The year ahead

Our progress in 2016 is due to our focus. We set out four key priorities and spent the year relentlessly driving toward them. But there is still work to do. Winning in local isn’t a one year proposition. There’s a reason it is one of the last spaces to be disrupted. It takes time, resources and a great team with a true passion for helping consumers get the most out of their daily lives and for helping small businesses thrive.

Moving forward, we will use what worked for us in 2016 as a foundation for continued progress and refinement. In 2017, we will continue to focus on making the business simpler to run, on making Groupon easier for customers to use and merchants to work with, on continuing to increase our customer base and how frequently they engage with us.

We will make ease and elegance a key priority in our products as we build toward a truly voucherless future. That’s right: Groupon with no physical coupons. At the same time, we plan to make our platform even more powerful for merchants with flexible discounts and even market rate inventory alongside our traditional deals. The combination should mean a seamless and frictionless experience where nearly 50 million customers always find what they’re looking for.

Long term success
Long term success

I’m often asked what long-term success looks like for Groupon. Ultimately, I see success as a world full of amazing neighborhoods built on amazing merchants — vibrant places where people eat, shop and — most importantly — connect. How do we do that? First, we have to ensure Groupon remains a great place to work with amazing people helping us tackle this incredible opportunity. We then need to remain focused on delivering against our strategy, which is helping us move step-by-step to being a daily habit for customers and an indispensable asset for businesses.

When we do all that, we’ll also have built a great company. I feel incredibly fortunate to be able to share this incredible journey with all of you, our valued stockholders, customers and employees.

We are as excited to play a part in that as we were eight years ago and excited to be even further along the path.

This letter contains forward looking statements. Groupon’s 2016 Annual Report includes a message on the use of forward looking statements and is available at http://investor.groupon.com/annuals-proxies.cfm.

Groupon Rewards Launches Nationwide

Today we’re excited to announce the nationwide launch of Groupon Rewards. Eliminating the hassles of check-ins, extra apps or punch cards, with Groupon Rewards you can automatically get benefits for things you already do — eating, shopping, and exploring your favorite local spots!

When you visit a participating Groupon Rewards merchant and use the credit card saved in your Groupon account, Rewards are unlocked after you’ve spent a certain amount predetermined by the business. Whether you’re a foodie or adventure-seeker, you get to enjoy savings and specials from the wide variety of great merchants we feature all over the U.S.

Selfishly, as a customer, this is the part I’m most excited about:

My wallet carries the basics only. Two of my least favorite things when shopping are 1) stuffing punch cards in my wallet or carrying multiple “frequent shopper” key fobs and 2) missing out on bonus points or visit counts just because I left my loyalty cards at home. Who knows where I’ll shop today or which of the two dozen punchcards I’ll need? With Rewards, as long as I register the credit cards I use on Groupon, I’ll never miss out on earning Rewards from my favorite Groupon businesses ever again. (You can enroll here.)

Groupon Rewards really nails it for small business owners, too. Merchants can focus on other aspects of their operations while leveraging Groupon’s vast subscriber base to launch a loyalty program with real impact. Additionally, business owners can access the Merchant Center on Groupon.com to help understand consumer purchase behavior in addition to the effectiveness of their Groupon Rewards program. Rewards is now open to businesses across the U.S. – if you’d like to register, sign up here.

We’re always proud to recommend local merchants to our customers, and Groupon Rewards makes it simple to show your loyalty to that new favorite business and reap the benefits. Do you have any suggestions of small businesses where you’d like to be rewarded? Leave them in the comments below and we’ll do our best!

Groupon Spring Break

As my bathrobe-clad neighbor says, you’re never too old to do Spring Break! Our Events Team packed their bags and hit the road in April, spreading the good word of Groupon among new and old friends in Seattle, Los Angeles and Miami. Did you miss the chance to hang out with Groupon? Photos and a recap are after the jump. If we didn’t come to your town, leave a comment and let us know if we can stay at your place next time. We’ll even make the bed.

Continue Reading

Announcing the Groupon Public API

We’re happy to announce that the Groupon Public API has come out of beta and available to anybody with a Groupon user account.

All you have to do is grab an API key and agree to the terms of use. As long as you’ve been playing by the rules we’ll honor requests using that API key. We’ll also throttle the number of requests per minute, currently to 200, but we may change that.

Enough about the rules already, what you can do with the API? Continue Reading

This Week's Groupon Lessons

Of all our findings this week, there was one discovery that stood out most. When compiling research for a murder mystery dinner deal, we found that most Americans wish they’d read more books, especially mystery books. As usual we went out of our way to help Groupon customers—preparing a tool for our readers to quickly achieve a greater knowledge of the mystery classics. Since then we’ve been inundated with thank you letters. Here’s what everyone has been so happy about:

Mysteries Revealed

There have been many, _many_ classic mystery stories over the years, far too many to read in their entirety. That’s why Groupon provides this handy list of Famous Murder Mystery Spoilers for the modern speed-reading sleuth.

  • The Case of the Ironclad Leg_: Butler did it.
  • The Creeping Wisp_: It was her other son, who faked his death in World War One.
  • Lord Herrington’s Fortune_: Revised copy of the will was rolled up inside candlestick.
  • Cody Extreme’s Cool Cases #117_: Mp3 player was in Steph’s paper-mâché volcano the whole time.
  • The Blood-Wrung Mantle_: Parrot saw everything.

This Week's Groupon Lessons

What did we learn this week at Groupon? As usual, lots. In our research of Tsada Yoga in Dallas, we discovered some interesting information about the history of yoga:

> Yoga was invented in the early 1960s by a group of exiled Frenchmen living in the Swiss Alps after being banished for bizarre, alternative science experiments. Their leader, Jean-Pierre “Yoga” Yoga, was a fitness buff who believed that proper stretching would allow him to read minds when done on one of his extra-sensory-inducing “Yoga mats.”

> Yoga traveled the world in a canoe, teaching his invigorating fitness plan and reading minds. However, a lifetime of deeply seeing into people’s inner-thoughts left him twisted and insane. Yoga gave up mind reading, saying, “The mind is a door locked for our own protection. I am hungry.” Today, the practice of Yoga continues to be performed on Yoga mats, though the true purpose of the mats—to induce clairvoyance—has largely been forgotten.

Even more interesting was our discovery about Zeno’s Paradox when doing background research on East Village Bowling Alley in San Diego:

> [Zeno’s dichotomy paradox](http://en.wikipedia.org/wiki/Zeno%27s_paradoxes#The_dichotomy_paradox) is a complex philosophical paradox studied by complex philosophical students. Most students don’t understand the paradox, but the few who do believe it is an attempt to prove the impossibility of motion with the following argument: before you can arrive somewhere, you must arrive halfway there. Therefore, before you can arrive at your final destination, you will encounter an infinite number of halfway points, making it impossible to ever get all the way to your target.

> Zeno’s actual goal with his paradox was to obtain free tacos at an ancient Greek bowling alley. His plan was to convince the server to give him half-price tacos, and then to cut that price in half, and so on. However, Zeno realized that he would never be able to get the price all the way down to zero because dividing by two always results in at least $2.46. Dejected, Zeno attempted to walk home, but encountered an infinite number of halfway points and died standing a mere Greek-yard outside his front door.

I hope next week we learn more about Raymond “Blue Ray” Raymonds, inventor of Blue-ray, but there’s really no way to predict that except to wait out the weekend.

Recent Press & Upcoming Features

As Groupon grows (now at 400,000 subscribers and $7,000,000 saved!), we’re increasingly drawing the attention of our nation’s newspaper people. Since you’re initiated enough to be reading our blog, stories describing Groupon are probably deeply uninteresting… but I’ll post a few anyway.

* TIME – [Interview With Groupon Founder, [Me]](http://cheapskate.blogs.time.com/2009/06/24/qa-with-groupon-com-founder-andrew-mason/)
* CBS Early Show – [Retail Stores Making Deals](http://www.cbsnews.com/video/watch/?id=5161371n&tag=cbsnewsMainColumnArea;cbsnewsMainColumnArea.0)
* Chicago Tribune – [Social entrepreneur finds money-making power of crowdsourcing](http://www.chicagotribune.com/business/columnists/chi-mon-minding-crowdsourcing-jul27,0,4860442.column)
* Chris Brogan – [Groupon – Clever Collective Buying Site](http://www.chrisbrogan.com/groupon-clever-collective-buying-site/)

For more, [check out our press page](https://www.groupon.com/press).

### Recent Site Upgrades

We hope you’re enjoying Groupon’s new design! The original version of Groupon was a hacked-together combination of WordPress and [The Point](http://www.thepoint.com), and while it did a great job of getting us through the first months, we’re glad to be rid of it. The new site is built in Ruby on Rails (still sharing the same code base as The Point), and sports a classy new design courtesy of our friends at [Firebelly](http://firebellydesign.com/).

When designing the new site, we assumed that most of our users were like us – skeptical about huge discounts, assuming that they’re too good to be true. For that reason, we focused on making each deal’s specifics as transparent as possible. If there are any special conditions, you’ll find them prominently displayed in the cheekily named, “The Fine Print” section towards the top of the page. And we’ve added user commenting, so you can check what other people are saying before you decide to buy.

Speaking of commenting, many of you have asked for ways to communicate with other Groupon users… planning Groupon outings, reviewing past Groupon experiences, suggesting ideas, etc. In a few days, we’ll launch Groupon forums, where we encourage you to chat about Groupon until your fingers fall off. Actually we recommend stopping while you still have one finger – you’ll need it to make future Groupon purchases.

### New City Launches

Groupon is launching shortly in Dallas, Houston, Seattle, San Diego, Phoenix, Philadelphia, and Denver, doubling our cities. Related fact: people are generally appreciative when you tell them about things that make their lives better. So if you’re into being appreciated and you have friends in one of those cities, you are now equipped with the tools necessary to incrementally increase your happiness.

### What Else?

Right now, the number one request we receive is, “bring Groupon to my city!” We’re doing what we can to oblige; Groupon will be in at least 25 cities by the end of 2009. And we continue to hack away at new features that will make Groupon even better. What else would you like to see?

Intern at Groupon!

Want to work at Chicago’s fastest growing tech startup? They probably don’t want you, but Groupon does! Just kidding – I was actually referring to Groupon when I said, “Chicago’s fastest growing tech startup.” Although that claim is totally unsubstantiated.

Anyway, Groupon is looking for a few interns to join the team. Sure to pique the entrepreneurial interest of any industrious young man or woman, Groupon internships cover a wide range of tasks, from sales to marketing to general office upkeepery. We’re looking for flexible, detail-oriented individuals who are willing to take on any project, no matter how humiliating character building.

Compensation is $10/hr.

To apply, send your resume and cover letter to [jobs@groupon.com](jobs@groupon.com) with the word “internship” in the subject line.

Groupon Rocked Wicker Park Fest

This past weekend Groupon had a booth at the Wicker Park Fest in Chicago. We gave away 40 FREE Groupons worth $40 each. Festival goers had to demonstrate a group activity to earn the free Groupon. We had groups doing the chicken dance, professing their undying love for Groupon and even climbing on top of each other to reach a Groupon dangling 12ft in the air. Nobody was hurt-except maybe a bit sunburnt.

Groupie kids enjoyed Grubbles (Groupon bubbles) and jelly beans. The hipsters loved the headband toss and each wore their new gear with pride. T-shirts and other goodie bags were also handed out to those Groupies that were not interested in climbing on top of one another or fighting the crowds.

Overall we had a great time at Wicker Park Fest and it was great to meet Groupies and teach future Groupies about what we do. If you have pictures from the fest or from redeeming your Groupon send them our way! Hope to see you all again next year!

Graceful Lifting for FREE Groupons

Graceful Lifting for FREE Groupons

Groupons Ahoy!

A bunch of us went out for drinks after work recently, where we met Michaela — girlfriend of new Groupon employee Dan Jessup and long-time Groupon customer. Michaela told us she had bought a few Groupons, but we thought she was exaggerating until she unveiled The Envelope. She has about 20 Groupons in this thing, and carries it in her purse so she never misses an opportunity to use a Groupon. She also cleverly writes all the expiration dates on the back of the envelope. If you have a cool way of tracking your Groupons, let us know!