paidContent 50: The world’s most successful digital media companies

24. Groupon

Advertising, United States (Public)

Last year’s rank: #23

Digital Content Revenue

$1,610,430,000 (100% of total)

Digital Snapshot

Daily online deals could easily have been an idea that local newspaper publishers pioneered, as they — once upon a time — owned local classified markets. Instead, Groupon and its pure-play ilk beat them to it, spawning several copycats, including from publishers. Groupon sales more than quadrupled in 2011, when it said it sold to more than 33 million customers for 250,000 merchants around the world. In difficult economic times, small businesses appear to have flocked toward cheaper, more guaranteed advertising methods.

Key Move

The credibility problem. Groupon went public to raise $700 million in November, valuing it at an eye-popping $13 billion. It spent the cash on overseas acquisitions to build international heft, but tweaked its revenue reports twice along the way and revised later results after disclosing a “material weakness” in its own financial controls. Turns out, it had incorrectly accounted for customer refunds, which made revenue look higher and losses lower than they actually were. The Office of Fair Trading launched an investigation after more than 50 advertising complaints were filed against Groupon in less than a year. It warned Groupon to correct widespread abuses of consumer protection law.

Our Methodology

We considered whether or not to include GroupOn, since the paidContent 50 does not aim to consider out-and-out e-commerce companies. But we decided to regard GroupOn as a new-line advertising company. It has managed to take its payment not from advertisers of products and services but, instead, a fee from every successful consumer transaction. GroupOn’s 2011 financial figures disclosed a single revenue category, which we include here.
Source: Shareholder letter

— RA