In 2010, Google offered to buy Groupon for $6 billion.

Andrew Mason said no.

A year later, Groupon went public at a $12.6 billion valuation. Mason looked like a genius. The fastest-growing company in history had bet on itself and won.

Except it hadn’t.

Groupon launched in Chicago in November 2008, right in the teeth of the financial crisis. Timing was everything - people wanted deals, businesses needed customers.

The model was brilliantly simple: buy discounted vouchers for local experiences, but only if enough people signed up. Group buying power. Groupon.

Just two years after launch, Groupon’s revenue was expected to exceed $500 million in 2010. The company filed documents showing $713.4 million in revenue for 2010, making it the first company to surpass $500 million in its third year.

Groupon reached unicorn status ($ billion valuation) in just 1 year and 5 months after founding - faster than any company before it.

For context: That beat Amazon, Google, Facebook. Every single one.

By October 2010, Groupon was available in 150 cities in North America and 100 cities in Europe, Asia and South America, with 35 million registered users.

The growth was absolutely insane. From January 2010 to January 2011, Groupon’s U.S. monthly revenue grew from $11 million to $89 million.

That’s 8x revenue growth. In one year.

First, Yahoo offered over $3 billion. Mason declined.

Then in November 2010, Google offered $5.3 billion with a $700 million earnout (some sources cite $6 billion).

Mason said no to that too.

His logic? Groupon was worth more. They’d prove it with an IPO.

On November 4, 2011, Groupon went public at $12.65 billion valuation, raising $700 million. It was the biggest Internet IPO since Google in 2004.

Mason’s bet looked brilliant. He’d turned down $6 billion and doubled the valuation in 12 months.

Wall Street celebrated. Tech media fawned. Mason was a visionary.

For about five minutes.

In its first earnings release as a public company, Groupon reported a fourth-quarter 2011 loss of $9.8 million on an adjusted basis, disappointing investors.

Then it got worse.

Additional investor concerns arose after the company restated 2011 revenues downward in March 2012.

The stock that debuted at $20 started plummeting. Eventually hit $5.

What happened?

The business model that looked amazing at scale... didn’t actually work at scale.

Here’s the fatal flaw nobody wanted to talk about during the hypergrowth phase:

Groupon’s deals attracted bargain hunters, not loyal customers.

A restaurant offers 50% off through Groupon. Great! New customers flood in. The restaurant loses money on every transaction (paying Groupon’s cut plus the discount), but figures they’ll make it back through repeat visits.

Except... they don’t.

The Groupon customers come once for the deal, then never return. They’re not restaurant loyalists. They’re discount chasers. As soon as the next deal pops up elsewhere, they’re gone.

Merchants quickly realized Groupon wasn’t customer acquisition. It was expensive customer rental.

So they churned. Stopped offering deals. Moved on.

This created Groupon’s death spiral: To keep the daily deal emails fresh, they needed constant new merchant supply. But satisfied merchants didn’t come back. So Groupon had to spend heavily acquiring new merchants to replace the ones who churned.

The unit economics didn’t work. Growth masked the problem. Until it couldn’t anymore.

Groupon’s entire distribution strategy relied on email.

They started with a 500-person email list in 2008 - friends, family, anyone they knew. First deal was 2-for-1 pizza at a bar downstairs from their Chicago office.

That email list grew to tens of millions. It was Groupon’s superpower. Daily deals landing in inbox. Open rates were phenomenal. Conversion was strong.

Then Google changed Gmail’s algorithm.

Groupon’s emails started landing in spam folders. The primary distribution channel - the entire growth engine - got kneecapped overnight.

They tried pivoting. Launched Groupon Goods to compete with Amazon on merchandise. Didn’t work. The magic was local deals, not e-commerce.

Meanwhile, Facebook and Google Ads matured. Small businesses could target customers directly, with better data, for less money. Why use Groupon?

Groupon initially used a non-standard accounting metric called ACSOI (Adjusted Consolidated Segment Operating Income). Critics argued it was used to present misleading profitability.

Groupon’s original IPO filing with ACSOI showed positive operating income of $60.6 million for 2010. After replacing ACSOI with standard metrics, the filing showed operating losses.

The SEC forced them to restate everything properly. The numbers looked way worse.

This destroyed investor confidence. Not only was the business model broken, but management had been playing accounting games to hide it.

On July 31, 2015, Ben Kaufman stepped down as CEO, Andrew Mason was replaced by Eric Lefkofsky in 2013.

Wait, that’s Quirky. Let me search for the correct Groupon CEO transition.

Actually, from the sources: Mason was CEO from founding until 2013 when he was replaced. The company continued struggling through multiple leadership changes.

Groupon’s current market capitalization is $4.71 billion, down from its $12.65 billion IPO in 2011 (note: this was from 2015, it’s declined further since).

The company still exists, but operates on a much smaller scale. They’ve shifted focus to experiences and travel deals rather than daily discounts.

Multiple rounds of layoffs. Office closures. Strategic pivots. The typical death-by-a-thousand-cuts decline of a company that grew too fast on a fundamentally flawed model.

The Two-Sided Marketplace That Only Worked on One Side

Customers loved Groupon. Merchants? Not so much. When only one side of your marketplace is happy, you don’t have a sustainable business. You have a slow-motion implosion.

Email Dependency

Building your entire distribution strategy on a channel you don’t control (someone else’s email algorithms) is organizational suicide. When Google changed Gmail, Groupon had no backup plan.

Discounts Don’t Build Brands

Groupon helped merchants attract bargain hunters, not build loyal customer bases. The merchants figured this out. Groupon’s response was to find new merchants, which worked until it didn’t.

Saying No to $6 Billion

This is the big one. Sometimes the best decision is to take the exit.

Mason turned down $6 billion from Google thinking Groupon was worth more. He was right - for about 12 months. Then the stock crashed and never recovered.

If your business model has fundamental flaws (and Groupon’s did), growing bigger just makes the eventual collapse more spectacular.