Andrew D. Mason
Chief Executive Officer
Groupon, Inc.
600 West Chicago Avenue, Suite 620
Chicago, Illinois 60654
312-676-5773
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we and the selling stockholders are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Groupon, Inc. is offering shares of its Class A common stock and the selling stockholders are offering shares of Class A common stock. We will not receive any proceeds from the sale of shares by the selling stockholders. This is our initial public offering and no public market currently exists for our shares. We anticipate that the initial public offering price of our Class A common stock will be between $ and $ per share.

We expect to apply to list our Class A common stock on the under the symbol GRPN.

Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 11.

Groupon, Inc. and the selling stockholders have granted the underwriters the right to purchase up to an additional shares of Class A common stock to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not approved or disapproved these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on , 2011.


		Page
Prospectus Summary		1
Risk Factors		11
Special Note Regarding Forward-Looking Statements and Industry Data		32
Use of Proceeds		34
Dividend Policy		34
Capitalization		35
Dilution		38
Selected Consolidated Financial and Other Data		40
Management's Discussion and Analysis of Financial Condition and Results of Operations		44
Business		68
Management		86
Executive Compensation		93
Related Party Transactions		111
Principal and Selling Stockholders		117
Description of Capital Stock		120
Material United States Federal Tax Considerations		124
Shares Eligible for Future Sale		130
Underwriting		132
Legal Matters		138
Experts		138
Where You Can Find Additional Information		138
Index to Consolidated Financial Statements		F-1

You should rely only on the information contained in this prospectus or in any free writing prospectus filed with the Securities and Exchange Commission. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with additional or different information. We and the selling stockholders are offering to sell, and seeking offers to buy, our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus or any free writing prospectus is accurate only as of its date, regardless of its time of delivery or any sale of shares of our Class A common stock.

Until , 2011 (25 days after the commencement of this offering), all dealers that buy, sell or trade shares of our Class A common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we, the selling stockholders nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about and to observe any restrictions relating to the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.

On the day of this writing, Groupon's over 7,000 employees offered more than 1,000 daily deals to 83 million subscribers across 43 countries and have sold to date over 70 million Groupons. Reaching this scale in about 30 months required a great deal of operating flexibility, dating back to Groupon's founding.

Before Groupon, there was The Point—a website launched in November 2007 after my former employer and one of my co-founders, Eric Lefkofsky, asked me to leave graduate school so we could start a business. The Point is a social action platform that lets anyone organize a campaign asking others to give money or take action as a group, but only once a "tipping point" of people agree to participate.

I started The Point to empower the little guy and solve the world's unsolvable problems. A year later, I started Groupon to get Eric to stop bugging me to find a business model. Groupon, which started as a side project in November 2008, applied The Point's technology to group buying. By January 2009, its popularity soaring, we had fully shifted our attention to Groupon.

I'm writing this letter to provide some insight into how we run Groupon. While we're looking forward to being a public company, we intend to continue operating according to the long-term focused principles that have gotten us to this point. These include:

We spend a lot of money acquiring new subscribers because we can measure the return and believe in the long-term value of the marketplace we're creating. In the past, we've made investments in growth that turned a healthy forecasted quarterly profit into a sizable loss. When we see opportunities to invest in long-term growth, expect that we will pursue them regardless of certain short-term consequences.

In our early days, each Groupon market featured only one deal per day. The model was built around our limitations: We had a tiny community of customers and merchants.

As we grew, we ran into the opposite problem. Overwhelming demand from merchants, with nine-month waiting lists in some markets, left merchant demand unfilled and contributed to hundreds of Groupon clones springing up around the world. And our customer base grew so large that many of our merchants had an entirely new problem: Struggling with too many customers instead of too few.

To adapt, we increased our investment in technology and released deal targeting, enabling us to feature different deals for different subscribers in the same market based on their personal preferences. In addition to providing a more relevant customer experience, this helped us to manage the flow of customers and opened the Groupon marketplace to more merchants, in turn diminishing a reason for clones to exist.

Today, we are pursuing models of reinvention that would not be possible without the critical mass of customers and merchants we have achieved. Groupon NOW, for example, allows customers to pull deals on demand for immediate redemption, and helps keep merchants bustling throughout the day.

Expect us to make ambitious bets on our future that distract us from our current business. Some bets we'll get right, and others we'll get wrong, but we think it's the only way to continuously build disruptive products.

We want the time people spend with Groupon to be memorable. Life is too short to be a boring company. Whether it's with a deal for something unusual, such as fire dancing classes, or a marketing

campaign such as Grouspawn⁽¹⁾, we seek to create experiences for our customers that make today different enough from yesterday to justify getting out of bed. While weighted toward the measurable, our decision-making process also considers what we feel in our gut to be great for our customers and merchants, even if it can't be quantified over a short time horizon.

After selling out on our original mission of saving the world to start hawking coupons, in order to live with ourselves, we vowed to make Groupon a service that people love using. We set out to upturn the stigmas created by traditional discounting services, trusting that nothing would be as crucial to our long-term success as happy customers and merchants. We put our phone number on our printed Groupons and built a huge customer service operation, manned in part with members of Chicago's improv community. We developed a sophisticated, multi-stage process to pick deals from high quality merchants with vigorously fact-checked editorial content. We built a dedicated merchant services team that works with our merchant partners to ensure satisfaction. And we have a completely open return policy, giving customers a refund if they ever feel like Groupon let them down. We do these things to make our customers and merchants happy, knowing that market success would be a side effect.

We believe that when once-great companies fall, they don't lose to competitors, they lose to themselves—and that happens when they stop focusing on making people happy. As such, we do not intend to be reactive to competitors. We will watch them, but we won't distract ourselves with decisions that aren't designed primarily to make our customers and merchants happy.

There are three main financial metrics that we track closely. First, we track gross profit, which we believe is the best proxy for the value we're creating. Second, we measure free cash flow—there is no better metric for long-term financial stability. Finally, we use a third metric to measure our financial performance—Adjusted Consolidated Segment Operating Income, or Adjusted CSOI. This metric is our consolidated segment operating income before our new subscriber acquisition costs and certain non-cash charges; we think of it as our operating profitability before marketing costs incurred for long-term growth.

If you're thinking about investing, hopefully it's because, like me, you believe that Groupon is better positioned than any company in history to reshape local commerce. The speed of our growth reflects the enormous opportunity before us to create a more efficient local marketplace. As with any business in a 30-month-old industry, the path to success will have twists and turns, moments of brilliance and other moments of sheer stupidity. Knowing that this will at times be a bumpy ride, we thank you for considering joining us.

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 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:

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.

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 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.

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.

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 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:

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.


Class A common stock offered
	By us		shares
	By the selling stockholders		shares
		Total	shares
Class A common stock to be outstanding after this offering			shares
Class B common stock to be outstanding after this offering			shares
		Total shares of common stock to be outstanding after this offering	shares
Use of proceeds			We expect our net proceeds from this offering will be approximately $ million. We plan to use the net proceeds to us from this offering for working capital and other general corporate purposes, which may include the acquisition of other businesses, products or technologies; however, we do not have any commitments for any acquisitions at this time. We will not receive any of the proceeds from the sale of shares of Class A common stock by the selling stockholders. See "Use of Proceeds."
Risk factors			You should read the "Risk Factors" section of this prospectus for a discussion of factors to consider carefully before deciding to invest in shares of our common stock.
Proposed symbol			"GRPN"

The number of shares of our Class A common stock that will be outstanding after this offering is based on 296,140,145 shares outstanding at March 31, 2011, and excludes:

Prior to the closing of this offering, we intend to recapitalize all of our outstanding shares of capital stock (other than our Series B preferred stock) into newly issued shares of our Class A common stock. In addition, we intend to recapitalize all of our outstanding shares of our Series B preferred stock into newly issued shares of our Class B common stock. The purpose of the recapitalization is to exchange all of our outstanding shares of capital stock (other than our Series B preferred stock) for shares of the Class A

common stock that will be sold in this offering. See "Related Party Transactions—Recapitalization." Except as otherwise indicated, all information in this prospectus (other than historical financial statements) assumes:

We present below our summary consolidated financial and other data for the periods indicated. Financial information for periods prior to 2008 has not been provided because we began operations in 2008. The summary consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance sheet data as of December 31, 2009 and 2010 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The balance sheet data for the year ended December 31, 2008 was derived from financial statements, which are not included in this prospectus. The summary consolidated statements of operations data for the periods ended March 31, 2010 and 2011 and the balance sheet data as of March 31, 2011 have been derived from our unaudited consolidated financials statements included elsewhere in this prospectus. The unaudited information was prepared on a basis consistent with that used to prepare our audited financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the unaudited period. The historical results presented below are not necessarily indicative of financial results to be achieved in future periods. You should read this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited and unaudited consolidated financial statements and accompanying notes, each included elsewhere in this prospectus.

			Year Ended December 31,									Three Months Ended March 31,

			2008			2009			2010			2010			2011
												(unaudited)			(unaudited)
			(dollars in thousands, except per share data)
Consolidated Statements of Operations Data:
Revenue			$	94		$	30,471		$	713,365		$	44,236		$	644,728
Cost of revenue				89			19,542			433,411			24,251			374,728

Gross profit				5			10,929			279,954			19,985			270,000
Operating expenses:
	Marketing			163			4,548			263,202			3,988			208,209
	Selling, general and administrative			1,474			7,458			233,913			7,426			178,939
	Acquisition-related			—			—			203,183			—			—

		Total operating expenses		1,637			12,006			700,298			11,414			387,148

(Loss) income from operations				(1,632	)		(1,077	)		(420,344	)		8,571			(117,148	)
Interest and other income (expense), net				90			(16	)		284			3			1,060
Equity-method investment activity, net of tax				—			—			—			—			(882	)

(Loss) income before provision for income taxes				(1,542	)		(1,093	)		(420,060	)		8,574			(116,970	)
Provision (benefit) for income taxes				—			248			(6,674	)		23			(3,079	)

Net loss (income)				(1,542	)		(1,341	)		(413,386	)		8,551			(113,891	)
Less: Net loss attributable to noncontrolling interests				—			—			23,746			—			11,223

Net (loss) income attributable to Groupon, Inc.				(1,542	)		(1,341	)		(389,640	)		8,551			(102,668	)
Dividends on preferred stock				(277	)		(5,575	)		(1,362	)		(523	)		—
Redemption of preferred stock in excess of carrying value				—			—			(52,893	)		—			(34,327	)
Adjustment of redeemable noncontrolling interests to redemption value				—			—			(12,425	)		—			(9,485	)
Preferred stock distributions				(339	)		—			—			—			—

Net (loss) income attributable to common stockholders			$	(2,158	)	$	(6,916	)	$	(456,320	)	$	8,028		$	(146,480	)

Net (loss) income per share
	Basic		$	(0.01	)	$	(0.04	)	$	(2.66	)	$	0.03		$	(0.95	)
	Diluted		$	(0.01	)	$	(0.04	)	$	(2.66	)	$	0.03		$	(0.95	)
Weighted average number of shares outstanding
	Basic			166,738,129			168,604,142			171,349,386			172,966,829			153,924,706
	Diluted			166,738,129			168,604,142			171,349,386			245,962,571			153,924,706

		As of December 31,									As of March 31, 2011

		2008			2009			2010			Actual			Pro Forma⁽¹⁾	Pro Forma As Adjusted⁽²⁾⁽³⁾
		(in thousands)
Consolidated Balance Sheet Data:
	Cash and cash equivalents	$	2,966		$	12,313		$	118,833		$	208,688
	Working capital (deficit)		2,643			3,988			(196,564	)		(228,748	)
	Total assets		3,006			14,962			381,570			541,410
	Total long-term liabilities		—			—			1,621			14,790
	Redeemable preferred stock		4,747			34,712			—			—
	Total Groupon, Inc. stockholders' (deficit) equity		(2,091	)		(29,969	)		8,077			7,086

(1): The pro forma column gives effect to (i) the recapitalization of all outstanding shares of our capital stock (other than our Series B preferred stock) into 296,140,145 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 1,199,988 shares of Class B common stock immediately prior to the closing of this offering; and (ii) the amendment and restatement of our certificate of incorporation upon the closing of this offering.
(2): The pro forma as adjusted column gives further effect to the sale by us of Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the range reflected on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3): Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the amount of pro forma as adjusted cash and cash equivalents, working capital (deficit), total assets and total Groupon, Inc. stockholders' equity by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of one million shares in the number of shares of Class A common stock offered by us would increase (decrease) cash and cash equivalents, working capital (deficit), total assets and total Groupon, Inc. stockholders' equity by approximately $ million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We use adjusted consolidated segment operating income, or Adjusted CSOI, and free cash flow as key non-GAAP financial measures. Adjusted CSOI and free cash flow are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures.

Adjusted CSOI is operating income of our two segments, North America and International, adjusted for online marketing expense, acquisition-related costs and stock-based compensation expense. Online marketing expense primarily represents the cost to acquire new subscribers and is dictated by the amount of growth we wish to pursue. Acquisition-related costs are non-recurring non-cash items related to certain of our acquisitions. Stock-based compensation expense is a non-cash item. We consider Adjusted CSOI to be 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. We believe it is important to view Adjusted CSOI as a complement to our entire consolidated statements of operations.

Our use of Adjusted CSOI has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

Because of these limitations, Adjusted CSOI should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, you should consider Adjusted CSOI alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Free cash flow, which is reconciled to "Net cash (used in) provided by operating activities," is cash flow from operations reduced by "Purchases of property and equipment." We use free cash flow, and ratios based on it, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it typically will present a more conservative measure of cash flows as purchases of fixed assets, software developed for internal use and website development costs are a necessary component of ongoing operations.

Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures. For example, free cash flow does not include the cash payments for business acquisitions. In addition, free cash flow reflects the impact of the timing difference between when we are paid by customers and when we pay merchants. Therefore, we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.

The following is a reconciliation of Adjusted CSOI to the most comparable GAAP measure, "(Loss) income from operations," for the years ended December 31, 2008, 2009 and 2010 and the first quarter of 2010 and 2011:

			Year Ended December 31,									Three Months Ended March 31,

			2008			2009			2010			2010		2011
			(in thousands)
(Loss) income from operations			$	(1,632	)	$	(1,077	)	$	(420,344	)	$	8,571	$	(117,148	)
	Adjustments:
	Online marketing			162			4,446			241,546			3,904		179,903
	Stock-based compensation			24			115			36,168			116		18,864
	Acquisition-related			—			—			203,183			—		—

		Total adjustments		186			4,561			480,897			4,020		198,767

Adjusted CSOI			$	(1,446	)	$	3,484		$	60,553		$	12,591	$	81,619

Adjusted Segment Operating Income:
North America			$	(1,446	)	$	3,484		$	88,036		$	12,591	$	38,610
International				—			—			(27,483	)		—	$	43,009

Adjusted CSOI			$	(1,446	)	$	3,484		$	60,553		$	12,591	$	81,619

The following is a reconciliation of free cash flow to the most comparable GAAP measure, "Net cash (used in) provided by operating activities," for the years ended December 31, 2008, 2009 and 2010 and the first quarter of 2010 and 2011:

An investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below and all of the other information contained in this prospectus before deciding whether to purchase our Class A common stock. Our business, prospects, financial condition or operating results could be materially adversely affected by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our Class A common stock could decline due to any of these risks, and you may lose all or part of your investment. In assessing the risks described below, you should also refer to the other information contained in this prospectus, including our consolidated financial statements and the related notes, before deciding to purchase any shares of our Class A common stock.

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

Although our revenue has increased substantially since inception, we may not be able to maintain our historical rate of revenue growth. We believe that our continued revenue growth will depend, among other factors, on our ability to:

However, we cannot assure you that we will successfully implement any of these actions.

We have experienced rapid growth over a short period in a new market that we have created and we do not know whether this market will continue to develop or whether it can be maintained. If we are unable to successfully respond to changes in the market, our business could be harmed.

Our business has grown rapidly as merchants and consumers have increasingly used our marketplace. However, this is a new market which we only created in late 2008 and which has operated at a substantial scale for only a limited period of time. Given the limited history, it is difficult to predict whether this market will continue to grow or whether it can be maintained. We expect that the market will evolve in ways which may be difficult to predict. For example, we anticipate that over time we will reach a point in most markets where we have achieved a market penetration such that investments in new subscriber acquisition are less productive and the continued growth of our gross profit will require more focus on increasing the rate at which our existing subscribers purchase Groupons. It is also possible that merchants or customers could broadly determine that they no longer believe in the value of our current services or marketplace. In the event of these or any other changes to the market, our continued success will depend on our ability to successfully adjust our strategy to meet the changing market dynamics. If we are unable to do so, our business could be harmed and our results of operations subject to a material negative impact.

We base our decisions regarding investments in subscriber acquisition primarily on our analysis of the profits generated from subscribers that we acquired in prior periods. If the estimates and assumptions we use are inaccurate, we may not be able to recover our subscriber acquisition costs and our growth rate and financial results will be adversely affected.

Our decisions regarding investments in subscriber acquisition substantially depend upon our analysis of the profits generated from subscribers we acquired in earlier periods. We refer to this as our subscriber economics. Our analysis regarding subscriber economics includes several assumptions, including:

If our assumptions regarding our subscriber economics, including those relating to the effectiveness of our marketing spend, prove incorrect, our ability to generate profits from our investments in new subscriber acquisitions may be less than we have assumed. In such case, we may need to increase expenses or otherwise alter our strategy and our results of operations could be negatively impacted.

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

We incurred net losses of $389.6 million and $102.7 million in 2010 and the first quarter of 2011, respectively, and had an accumulated deficit of $522.1 million as of March 31, 2011. We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to invest to increase our subscriber base, increase the number and variety of deals we offer each day, expand our marketing channels, expand our operations, hire additional employees and develop our technology platform. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. Many of our efforts to generate revenue from our business are new and unproven, and any failure to increase our revenue could prevent us from attaining or increasing profitability. We cannot be certain that we will be able to attain or increase profitability on a quarterly or annual basis. If we are unable to effectively manage these risks and difficulties as we encounter them, our business, financial condition and results of operations may suffer.

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

We spent $179.9 million on online marketing initiatives relating to subscriber acquisition for the first quarter of 2011 and expect to continue to spend significant amounts to acquire additional subscribers. We must continue to retain and acquire subscribers that purchase Groupons in order to increase revenue and achieve profitability. We cannot assure you that the revenue or gross profit from subscribers we acquire will ultimately exceed the cost of acquiring new subscribers. If consumers do not perceive our Groupon offers to be of high value and quality or if we fail to introduce new and more relevant deals, we may not be able to acquire or retain subscribers. If we are unable to acquire new subscribers who purchase Groupons in numbers sufficient to grow our business, or if subscribers cease to purchase Groupons, the revenue or gross profit we generate may decrease and our operating results will be adversely affected.

We believe that many of our new subscribers originate from word-of-mouth and other non-paid referrals from existing subscribers, and therefore we must ensure that our existing subscribers remain loyal to our service in order to continue receiving those referrals. If our efforts to satisfy our existing subscribers are not successful, we may not be able to acquire new subscribers in sufficient numbers to continue to grow our business or we may be required to incur significantly higher marketing expenses in order to acquire new subscribers. Further, we believe that our success is influenced by the level of communication and sharing among subscribers. If the level of usage by our subscriber base declines or does not grow as expected, we may suffer a decline in subscriber growth or revenue. A significant decrease in the level of usage or subscriber growth would have an adverse effect on our business, financial condition and results of operations.

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

We depend on our ability to attract and retain merchants that are prepared to offer products or services on compelling terms through our marketplace. We do not have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to consumers or favorable payment terms to us. We must continue to attract and retain merchants in order to increase revenue and achieve profitability. If new merchants do not find our marketing and promotional services effective, or if existing merchants do not believe that utilizing our products provides them with a long-term increase in customers, revenues or profits, they may stop making offers through our marketplace. In addition, we may experience attrition in our merchants in the ordinary course of business resulting from several factors, including losses to competitors and merchant closures or bankruptcies. If we are unable to attract new merchants in numbers sufficient to grow our business, or if too many merchants are unwilling to offer products or services with compelling terms through our marketplace or offer favorable payment terms to us, we may sell fewer Groupons and our operating results will be adversely affected.

If our efforts to market, advertise and promote products and services from our existing merchants are not successful, or if our existing merchants do not believe that utilizing our services provides them with a long-term increase in customers, revenues or profits, we may not be able to retain or attract merchants in sufficient numbers to grow our business or we may be required to incur significantly higher marketing expenses or accept lower margins in order to attract new merchants. A significant increase in merchant attrition or decrease in merchant growth would have an adverse effect on our business, financial condition and results of operation.

Our business is highly competitive. Competition presents an ongoing threat to the success of our business.

We expect competition in e-commerce generally, and group buying in particular, to continue to increase because there are no significant barriers to entry. A substantial number of group buying sites that attempt to replicate our business model have emerged around the world. In addition to such competitors, we expect to increasingly compete against other large internet and technology-based businesses, such as Facebook, Google and Microsoft, each of which has launched initiatives which are directly competitive to our business. We also expect to compete against other internet sites that are focused on specific communities or interests and offer coupons or discount arrangements related to such communities or interests. We also compete with traditional offline coupon and discount services, as well as newspapers, magazines and other traditional media companies who provide coupons and discounts on products and services.

We believe that our ability to compete depends upon many factors both within and beyond our control, including the following:

Many of our current and potential competitors have longer operating histories, significantly greater financial, marketing and other resources and larger subscriber bases than we do. These factors may allow our competitors to benefit from their existing customer or subscriber base with lower customer acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in consumer habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build larger subscriber bases or generate revenue from their subscriber bases more effectively than we do. Our competitors may offer deals that are similar to the deals we offer or that achieve greater market acceptance than the deals we offer. This could attract subscribers away from our websites and applications, reduce our market share and adversely impact our gross margin. In addition, we are dependent on some of our existing or potential competitors, including Facebook, Google and Microsoft, for banner advertisements and other marketing initiatives to acquire new subscribers. Our ability to utilize their platforms to acquire new subscribers may be adversely affected if they choose to compete more directly with us.

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.

As of March 31, 2011, we had 83.1 million subscribers to our daily emails, and we expect the number of subscribers to grow significantly during the remainder of 2011. Acquiring a subscriber base is costly, and the success of our business depends on our ability to generate revenue from new and existing subscribers. In 2010 and the first quarter of 2011, we spent $241.5 million and $179.9 million, respectively, on online marketing initiatives relating to subscriber acquisition. As our subscriber base continues to evolve, it is possible that the composition of our subscribers may change in a manner that makes it more difficult to generate revenue and gross profit to offset the costs associated with acquiring new subscribers. For example, if we acquire a large number of new subscribers who are not viewed as an attractive demographic by merchants, we may not be able to generate compelling products for those subscribers to offset the cost of acquiring those subscribers. If the cost to acquire subscribers is greater than the revenue or gross profit we generate over time 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.

The success of our business depends in part on our ability to retain and increase the number of merchants who use our service. Currently, when a merchant partners with us to offer a deal for its products or services, it receives an agreed upon percentage of the revenue from each Groupon sold, and we retain the rest. If merchants decide that utilizing our services no longer provides an effective means of attracting new customers or selling their goods and services, they may demand a higher percentage of the revenue from each Groupon sold. This would adversely affect our gross profit.

In addition, we expect to face increased competition from other internet and technology-based businesses such as Facebook, Google and Microsoft, each of which has launched initiatives which are directly competitive to our business. We also have seen that some competitors will accept lower margins, or negative margins, to attract attention and acquire new subscribers. If competitors engage in group buying initiatives in which merchants receive a higher percentage of the revenue than we currently offer, we may

be forced to pay a higher percentage of the revenue than we currently offer, which may reduce our gross profit.

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.

Our merchant payment terms and revenue growth have provided us with operating cash flow to fund our working capital needs. Our merchant arrangements are generally structured such that we collect cash up front when our customers purchase Groupons and make payments to our merchants at a subsequent date. In North America, we typically pay our merchants in installments within sixty days after the Groupon is sold. In most of our International markets, merchants are not paid until the customer redeems the Groupon. Our accrued merchant payable, which primarily consists of payment obligations to our merchants, has grown, both nominally and as a percentage of revenue, as our revenue has increased, particularly the revenue from our international segment. Our accrued merchant payable balance increased from $4.3 million as of December 31, 2009 to $290.7 million as of March 31, 2011. We use the operating cash flow provided by our merchant payment terms and revenue growth to fund our working capital needs. If we offer our merchants more favorable or accelerated payment terms or our revenue does not continue to grow in the future, our operating cash flow and results of operations could be adversely impacted and we may have to seek alternative financing to fund our working capital needs.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or a decrease in subscriber willingness to receive messages could adversely affect our revenue and business.

Our business is highly dependent upon email and other messaging services. Deals offered through emails and other messages sent by us, or on our behalf by our affiliates, generate a substantial portion of our revenue. Because of the importance of email and other messaging services to our businesses, if we are unable to successfully deliver emails or messages to our subscribers or potential subscribers, or if subscribers decline to open our emails or messages, our revenue and profitability would be adversely affected. Actions by third parties to block, impose restrictions on, or charge for the delivery of, emails or other messages could also materially and adversely impact our business. From time to time, internet service providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails or other messages to third parties. In addition, our use of email and other messaging services to send communications about our website or other matters may result in legal claims against us, which if successful might limit or prohibit our ability to send emails or other messages. Any disruption or restriction on the distribution of emails or other messages or any increase in the associated costs would materially and adversely affect our revenue and profitability.

We have a rapidly evolving business model and our new product and service offerings could fail to attract or retain subscribers or generate revenue.

We have a rapidly evolving business model and are regularly exploring entry into new market segments and the introduction of new products and features with respect to which we may have limited experience. In addition, our subscribers may not respond favorably to our new products and services. These products and services may present new and significant technology challenges, and we may be subject to claims if subscribers of these offerings experience service disruptions or failures or other quality issues. If products or services we introduce, such as changes to our websites and applications, the introduction of social networking and location-based marketing elements to our websites, or entirely new lines of business that we may pursue, fail to engage subscribers or merchants, we may fail to acquire or retain subscribers or generate sufficient revenue or other value to justify our investment, and our business may be materially and adversely affected. Our ability to retain or increase our subscriber base and revenue will depend heavily on our ability to innovate and to create successful new products and services. In addition, the

relative profitability, if any, of our new activities may be lower than that of our historical activities, and we may not generate sufficient revenue from new activities to recoup our investments in them. If any of this were to occur, it could damage our reputation, limit our growth and negatively affect our operating results.

There are many risks associated with our international operations and international expansion.

Our international expansion has been rapid and our international business has become critical to the growth in our revenue and our ability to achieve profitability. In 2010 and the first quarter of 2011, 37.2% and 53.8%, respectively, of our revenue was generated from our international operations. We began our international operations in May 2010 with the acquisition of CityDeal Europe GmbH, or CityDeal, which was founded by Oliver Samwer and Marc Samwer. Since the CityDeal acquisition, Messrs. Samwer have served as consultants and been extensively involved in the development and operations of our International segment. The agreements under which Messrs. Samwer provide us with consulting services will expire in October 2011 and we can make no assurances that the loss of their services will not disrupt our international operations or have an adverse effect on our ability to grow our international business.

Further expansion into international markets requires management attention and resources and requires us to localize our services to conform to a wide variety of local cultures, business practices, laws and policies. The different commercial and internet infrastructure in other countries may make it more difficult for us to replicate our business model. In many countries, we compete with local companies that understand the local market better than we do, and we may not benefit from first-to-market advantages. We may not be successful in expanding into particular international markets or in generating revenue from foreign operations. As we continue to expand internationally, we are increasingly subject to risks of doing business internationally, including the following:

Some of these factors may cause our international costs of doing business to exceed our comparable costs in North America. As we expand our international operations and have additional portions of our international revenue denominated in foreign currencies, we also could become subject to increased difficulties in collecting accounts receivable and repatriating money without adverse tax consequences and increased risks relating to foreign currency exchange rate fluctuations.

We conduct certain functions, including product development, subscriber support and other operations, in regions outside of North America. We are subject to both U.S. and local laws and regulations applicable to our international activities, and any factors which reduce the anticipated benefits, including cost efficiencies and productivity improvements, associated with providing these functions outside of North America could adversely affect our business.

We currently use a common technology platform in our North American segment to operate our business and are in the process of migrating our operations in our International segment to the same platform. Such changes to our technology platform and related software carry risks such as cost overruns, project delays and business interruptions and delays. If we experience a material business interruption as a result of this process, it could have a material adverse effect on our business, financial position and results of operations and could cause the market value of our common stock to decline.

We are continuing to expand our services internationally. In some countries, expansion of our business may require a close commercial relationship with one or more local banks, a shared ownership interest with a local entity or registration as a bank under local law. Such requirements may reduce our revenue, increase our costs or limit the scope of our activities in particular countries. Any limitation on our ability to expand internationally could harm our business.

An increase in our refund rates could reduce our liquidity and profitability.

Our "Groupon Promise" states that we will provide our customers with a refund of the purchase price of a Groupon if they believe that we have let them down. As we increase our revenue, our refund rates may exceed our historical levels. A downturn in general economic conditions may also increase our refund rates. An increase in our refund rates could significantly reduce our liquidity and profitability.

As we do not have control over our merchants and the quality of products or services they deliver, we rely on a combination of our historical experience with each merchant and online and offline research of customer reviews of merchants for the development of our estimate for refund claims. Our actual level of refund claims could prove to be greater than the level of refund claims we estimate. If our refund reserves are not adequate to cover future refund claims, this inadequacy could have a material adverse effect on our liquidity and profitability.

Our standard agreements with our merchants generally limit the time period during which we may seek reimbursement for customer refunds or claims. Our customers may make claims for refunds with respect to which we are unable to seek reimbursement from our merchants. Our inability to seek reimbursement from our merchants for refund claims could have an adverse effect on our liquidity and profitability.

If our merchants do not meet the needs and expectations of our subscribers, our business could suffer.

Our business depends on our reputation for providing high-quality deals, and our brand and reputation may be harmed by actions taken by merchants that are outside our control. Any shortcomings of one or more of our merchants, particularly with respect to an issue affecting the quality of the deal offered or the products or services sold, may be attributed by our subscribers to us, thus damaging our reputation, brand value and potentially affecting our results of operations. In addition, negative publicity and subscriber sentiment generated as a result of fraudulent or deceptive conduct by our merchants could

damage our reputation, reduce our ability to attract new subscribers or retain our current subscribers, and diminish the value of our brand.

We cannot assure you that we will be able to manage the growth of our organization effectively.

We have experienced rapid growth in demand for our services since our inception. Our employee headcount and number of subscribers have increased significantly since our inception, and we expect this growth to continue for the foreseeable future. The growth and expansion of our business and service offerings places significant demands on our management and our operational and financial resources. We are required to manage multiple relations with various merchants, subscribers, technology licensors and other third parties. In the event of further growth of our operations or in the number of our third-party relationships, our information technology systems or our internal controls and procedures may not be adequate to support our operations. To effectively manage our growth, we must continue to implement operational plans and strategies, improve and expand our infrastructure of people and information systems, and train and manage our employee base.

The loss of one or more key members of our management team, or our failure to attract, integrate and retain other highly qualified personnel in the future, could harm our business.

We currently depend on the continued services and performance of the key members of our management team, including Andrew D. Mason, our Chief Executive Officer, and Jason E. Child, our Chief Financial Officer. Mr. Mason is one of our founders and his leadership has played an integral role in our growth. The loss of key personnel, including key members of management as well as our marketing, sales, product development and technology personnel, could disrupt our operations and have an adverse effect on our ability to grow our business. Moreover, many members of our management are new to our team or have been recently promoted to new roles.

Eric P. Lefkofsky is one of our founders and has served as the Executive Chairman of our Board of Directors since our inception. Although Mr. Lefkofsky historically has devoted a significant amount of his business time to Groupon, he is under no contractual or other obligation to do so and may not do so in the future. Mr. Lefkofsky invests his business time and financial resources in a variety of other businesses, including Lightbank LLC, a private investment firm that Mr. Lefkofsky co-founded with Bradley A. Keywell. Such investments may be in areas that present conflicts with, or involve businesses related to, our operations. If Mr. Lefkofsky devotes less time to our business in the future, our business may be adversely affected.

As we become a more mature company, we may find our recruiting and retention efforts more challenging. We are seeking to hire a significant number of personnel in 2011, including certain key management personnel. If we do not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, we may be unable to grow effectively.

We may be subject to additional unexpected regulation which could increase our costs or otherwise harm our business.

The application of certain laws and regulations to Groupons, as a new product category, is uncertain. These include laws and regulations such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, and unclaimed and abandoned property laws. In addition, from time to time, we may be notified of additional laws and regulations which governmental organizations or others may claim should be applicable to our business. For example, we were recently notified by the Massachusetts Alcoholic Beverages Control Commission that Groupon discounts for some Massachusetts restaurants may not be in compliance with Massachusetts liquor laws and regulations. If we are required to alter our business practices as a result of any laws and regulations, our revenue could decrease, our costs could increase and our business could otherwise be harmed. In addition, the costs and expenses associated

with defending any actions related to such additional laws and regulations and any payments of related penalties, judgments or settlements could adversely impact our profitability.

The implementation of the CARD Act and similar state and foreign laws may harm our business and results of operations.

Groupons may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD Act, and state laws governing gift cards, stored value cards and coupons. Other foreign jurisdictions have similar laws in place, in particular European jurisdictions where the European E-Money Directive regulates the business of electronic money institutions. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. For example, if Groupons are subject to the CARD Act, the value of the Groupon must not expire before the later of (i) five years after the date on which the Groupon was issued or the date on which the subscriber last loaded funds on the Groupon if the Groupon has a reloadable feature; and (ii) the Groupon's expiration date, if any. We are currently subject to several purported class actions claiming that Groupons are subject to the CARD Act. In the event that it is determined that Groupons are subject to the CARD Act or any similar state or foreign law or regulation, our liabilities with respect to unredeemed Groupons may be materially higher than the amounts shown in our financial statements and we may be subject to additional fines and penalties. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected.

If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed Groupons, our net income could be materially and adversely affected.

In certain states and foreign jurisdictions, Groupons may be considered a gift card. Some of these states and foreign jurisdictions include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts relating to unredeemed Groupons based on our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to Groupons is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with subscribers and merchants and our role as it relates to the issuance and delivery of a Groupon. In the event that one or more states or foreign jurisdictions successfully challenges our position on the application of its unclaimed and abandoned property laws to Groupons, or if the estimates that we use in projecting the likelihood of Groupons being redeemed prove to be inaccurate, our liabilities with respect to unredeemed Groupons may be materially higher than the amounts shown in our financial statements. If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected. Moreover, a successful challenge to our position could subject us to penalties or interest on unreported and unremitted sums, and any such penalties or interest would have a further material adverse impact on our net income.

Government regulation of the internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the internet and e-commerce. Existing and future regulations and laws could impede the growth of the internet or other online services. These regulations and laws may involve taxation, tariffs, subscriber privacy, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the characteristics and quality of

services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. In addition, it is possible that governments of one or more countries may seek to censor content available on our websites and applications or may even attempt to completely block access to our websites. Adverse legal or regulatory developments could substantially harm our business. In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our subscriber base may be adversely affected and we may not be able to maintain or grow our revenue as anticipated.

New tax treatment of companies engaged in internet commerce may adversely affect the commercial use of our services and our financial results.

Due to the global nature of the internet, it is possible that various states or foreign countries might attempt to regulate our transmissions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and local levels are currently reviewing the appropriate treatment of companies engaged in internet commerce. New or revised international, federal, state or local tax regulations may subject us or our subscribers to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the internet. New or revised taxes and, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and decrease the attractiveness of advertising and selling goods and services over the internet. New taxes could also create significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an adverse effect on our business and results of operations.

Failure to comply with federal, state and international privacy laws and regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. For example, recently there have been Congressional hearings and increased attention to the capture and use of location-based information relating to users of smartphones and other mobile devices. We have posted privacy policies and practices concerning the collection, use and disclosure of subscriber data on our websites and applications. Several internet companies have incurred penalties for failing to abide by the representations made in their privacy policies and practices. In addition, several states have adopted legislation that requires businesses to implement and maintain reasonable security procedures and practices to protect sensitive personal information and to provide notice to consumers in the event of a security breach. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and practices could result in a loss of subscribers or merchants and adversely affect our business. Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web "cookies" for behavioral advertising. The regulation of these cookies and other current online advertising practices could adversely affect our business.

We may suffer liability as a result of information retrieved from or transmitted over the internet and claims related to our service offerings.

We may be, and in certain cases have been, sued for defamation, civil rights infringement, negligence, patent, copyright or trademark infringement, invasion of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust or other legal claims relating to information that is published or made available on our websites or service offerings we make available (including provision of an application programming interface platform for third parties to access our website, mobile device services and geolocation applications). This risk is enhanced in certain jurisdictions outside the United States, where our liability for such third-party actions may be less clear and we may be less protected. In addition, we could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable. If any of these events occurs, our net income could be materially and adversely affected.

We are subject to risks associated with information disseminated through our websites and applications, including consumer data, content that is produced by our editorial staff and errors or omissions related to our product offerings. Such information, whether accurate or inaccurate, may result in our being sued by our merchants, subscribers or third parties and as a result our revenue and goodwill could be materially and adversely affected.

Our business depends on our ability to maintain and scale the network infrastructure necessary to operate our websites and applications, and any significant disruption in service on our websites or applications could result in a loss of subscribers or merchants.

Subscribers access our deals through our websites and applications. Our reputation and ability to acquire, retain and serve our subscribers are dependent upon the reliable performance of our websites and applications and the underlying network infrastructure. As our subscriber base and the amount of information shared on our websites and applications continue to grow, we will need an increasing amount of network capacity and computing power. We have spent and expect to continue to spend substantial amounts on data centers and equipment and related network infrastructure to handle the traffic on our websites and applications. The operation of these systems is expensive and complex and could result in operational failures. In the event that our subscriber base or the amount of traffic on our websites and applications grows more quickly than anticipated, we may be required to incur significant additional costs. Interruptions in these systems, whether due to system failures, computer viruses or physical or electronic break-ins, could affect the security or availability of our websites and applications, and prevent our subscribers from accessing our services. A substantial portion of our network infrastructure is hosted by third-party providers. Any disruption in these services or any failure of these providers to handle existing or increased traffic could significantly harm our business. Any financial or other difficulties these providers face may adversely affect our business, and we exercise little control over these providers, which increases our vulnerability to problems with the services they provide. If we do not maintain or expand our network infrastructure successfully or if we experience operational failures, we could lose current and potential subscribers and merchants, which could harm our operating results and financial condition.

Our business depends on the development and maintenance of the internet infrastructure.

The success of our services will depend largely on the development and maintenance of the internet infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as timely development of complementary products, for providing reliable internet access and services. The internet has experienced, and is likely to continue to experience, significant growth in the number of users and amount of traffic. The internet infrastructure may be unable to support such demands. In addition, increasing numbers of users, increasing bandwidth requirements or problems caused by viruses, worms, malware and similar programs may harm the performance of the internet. The backbone computers of the internet have been the targets of such programs. The internet has

experienced a variety of outages and other delays as a result of damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the level of internet usage generally as well as the level of usage of our services, which could adversely impact our business.

We may not be able to adequately protect our intellectual property rights or may be accused of infringing intellectual property rights of third parties.

We regard our subscriber list, trademarks, service marks, copyrights, patents, trade dress, trade secrets, proprietary technology and similar intellectual property as critical to our success, and we rely on trademark, copyright and patent law, trade secret protection and confidentiality and/or license agreements with our employees and others to protect our proprietary rights. Effective intellectual property protection may not be available in every country in which our deals are made available. We also may not be able to acquire or maintain appropriate domain names or trademarks in all countries in which we do business. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring and using domain names that are similar to, infringe upon or diminish the value of our trademarks and other proprietary rights. We may be unable to prevent third parties from using and registering our trademarks, or trademarks that are similar to, or diminish the value of, our trademark in some countries.

We may not be able to discover or determine the extent of any unauthorized use of our proprietary rights. Third parties that license our proprietary rights also may take actions that diminish the value of our proprietary rights or reputation. The protection of our intellectual property may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our intellectual property may not adequately protect our rights or prevent third parties from infringing or misappropriating our proprietary rights. We are currently subject to multiple litigations and disputes related to our intellectual property and service offerings. We may in the future be subject to additional litigation and disputes. The costs of supporting such litigation and disputes are considerable, and there can be no assurances that favorable outcomes will be obtained.

We are currently subject to third-party claims that we infringe their proprietary rights or trademarks and expect to be subject to additional claims in the future. Such claims, whether or not meritorious, may result in the expenditure of significant financial and managerial resources, injunctions against us or the payment of damages by us. We may need to obtain licenses from third parties who allege that we have infringed their rights, but such licenses may not be available on terms acceptable to us or at all. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims.

Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, or if we receive unfavorable media coverage, our ability to expand our base of subscribers and merchants will be impaired and our business and operating results will be harmed.

We believe that the brand identity that we have developed has significantly contributed to the success of our business. We also believe that maintaining and enhancing the "Groupon" brand is critical to expanding our base of subscribers and merchants. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be successful. If we fail to promote and maintain the "Groupon" brand, or if we incur excessive expenses in this effort, our business, operating results and financial condition will be materially and adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Maintaining and enhancing our brand will depend largely on our ability to be a group buying leader and to continue to provide reliable, trustworthy and high quality deals, which we may not do successfully.

We receive a high degree of media coverage around the world. Unfavorable publicity or consumer perception of our websites, applications, practices or service offerings, or the offerings of our merchants, could adversely affect our reputation, resulting in difficulties in recruiting, decreased revenue and a negative impact on the number of merchants we feature and the size of our subscriber base, the loyalty of our subscribers and the number and variety of deals we offer each day. As a result, our business, financial condition and results of operations could be materially and adversely affected.

Acquisitions, joint ventures and strategic investments could result in operating difficulties, dilution and other harmful consequences.

We expect to continue to evaluate and consider a wide array of potential strategic transactions, including acquisitions and dispositions of businesses, joint ventures, technologies, services, products and other assets and strategic investments. At any given time, we may be engaged in discussions or negotiations with respect to one or more of these types of transactions. Any of these transactions could be material to our financial condition and results of operations. The process of integrating any acquired business may create unforeseen operating difficulties and expenditures and is itself risky. The areas where we may face difficulties include:

Moreover, we may not realize the anticipated benefits of any or all of our acquisitions, or we may not realize them in the time frame expected. Future acquisitions or mergers may require us to issue additional equity securities, spend a substantial portion of our available cash, or incur debt or liabilities, amortize expenses related to intangible assets or incur write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders.

Our total number of subscribers may be higher than the number of our actual subscribers and may not be representative of the number of persons who are active potential customers.

Our total number of subscribers may be higher than the number of our actual subscribers because some subscribers have multiple registrations, other subscribers have died or become incapacitated and others may have registered under fictitious names. Given the challenges inherent in identifying these subscribers, we do not have a reliable system to accurately identify the number of actual subscribers, and thus we rely on the number of total subscribers as our measure of the size of our subscriber base. In addition, the number of subscribers includes the total number of individuals that have completed registration through a specific date, less individuals who have unsubscribed, and should not be considered as representative of the number of persons who continue to actively consider our deals by reviewing our email offers.

Our business may be subject to seasonal sales fluctuations which could result in volatility or have an adverse effect on the market price of our common stock.

Our business, like that of our merchants, may be subject to some degree of sales seasonality. As the growth of our business stabilizes, these seasonal fluctuations may become more evident. Seasonality may cause our working capital cash flow requirements to vary from quarter to quarter depending on the variability in the volume and timing of sales. These factors, among other things, make forecasting more difficult and may adversely affect our ability to manage working capital and to predict financial results accurately, which could adversely affect the market price of our common stock.

The business of selling goods and services over the internet, particularly through coupons, is dynamic and relatively new. Concerns about fraud, privacy and other problems may discourage additional consumers and merchants from adopting the internet as a medium of commerce. In countries such as the U.S., Germany, the United Kingdom, France and Japan, where our services and online commerce generally have been available for some time and the level of market penetration of our services is high, acquiring new subscribers for our services may be more difficult and costly than it has been in the past. In order to expand our subscriber base, we must appeal to and acquire subscribers who historically have used traditional means of commerce to purchase goods and services and may prefer internet analogues to our offerings, such as the retailer's own website. If these consumers prove to be less active than our earlier subscribers, or we are unable to gain efficiencies in our operating costs, including our cost of acquiring new subscribers, our business could be adversely impacted.

Our business is subject to interruptions, delays or failures resulting from earthquakes, other natural catastrophic events or terrorism.

Our services, operations and the data centers from which we provide our services are vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins and similar events. A significant natural disaster, such as an earthquake, fire or flood, could have a material adverse impact on our business, financial condition and results of operations and our insurance coverage may be insufficient to compensate us for losses that may occur. Acts of terrorism could cause disruptions to the internet, our business or the economy as a whole. We may not have sufficient protection or recovery plans in certain circumstances, such as natural disasters affecting areas where data centers upon which we rely are located, and our business interruption insurance may be insufficient to compensate us for losses that may occur. Such disruptions could negatively impact our ability to run our websites, which could harm our business.

Our results of operations may be negatively impacted by investments we make as we enter new product and service categories.

We have offered Groupons in over 140 different types of businesses, services and activities that fall into six broad categories. We intend to continue to invest in the development of our existing categories and to expand into new categories. We may make substantial investments in such new categories in anticipation of future revenue. We may also face greater competition in specific categories from internet sites that are more focused on such categories. If the launch of a new category requires investments greater than we expect, if we are unable to generate sufficient merchant offers which are of high quality, value and variety or if the revenue generated from a new category grows more slowly or produces lower gross profit than we expect, our results of operations could be adversely impacted.

Failure to deal effectively with fraudulent transactions and subscriber disputes would increase our loss rate and harm our business.

Groupons are issued in the form of redeemable coupons with unique identifiers. It is possible that consumers or other third parties will seek to create counterfeit Groupons in order to fraudulently purchase discounted goods and services from our merchants. While we use advanced anti-fraud technologies, it is possible that technically knowledgeable criminals will attempt to circumvent our anti-fraud systems using increasingly sophisticated methods. In addition, our service could be subject to employee fraud or other internal security breaches, and we may be required to reimburse consumers and/or merchants for any funds stolen or revenue lost as a result of such breaches. Our merchants could also request reimbursement, or stop using Groupon, if they are affected by buyer fraud or other types of fraud.

We may incur significant losses from fraud and counterfeit Groupons. We may incur losses from claims that the consumer did not authorize the purchase, from merchant fraud, from erroneous transmissions, and from consumers who have closed bank accounts or have insufficient funds in them to satisfy payments. In addition to the direct costs of such losses, if they are related to credit card transactions and become excessive, they could potentially result in our losing the right to accept credit cards for payment. If we were unable to accept credit cards for payment, we would suffer substantial reductions in revenue, which would cause our business to suffer. While we have taken measures to detect and reduce the risk of fraud, these measures need to be continually improved and may not be effective against new and continually evolving forms of fraud or in connection with new product offerings. If these measures do not succeed, our business will suffer.

We are exposed to fluctuations in currency exchange rates and interest rates.

Because we conduct a significant and growing portion of our business outside the United States but report our financial results in U.S. dollars, we face exposure to adverse movements in currency exchange rates. The results of operations of our International segment are exposed to foreign exchange rate fluctuations as the financial results are translated from the local currency into U.S. dollars upon consolidation. If the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions will result in increased revenue, operating expenses and net income. Similarly, if the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transaction will result in decreased revenue, operating expenses and net income. As exchange rates vary, sales and other operating results, when translated, may differ materially from expectations.

In addition, we face exposure to fluctuations in interest rates which may impact our investment income unfavorably.

We accept payments using a variety of methods, including credit card, debit card and gift certificates. As we offer new payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability. We rely on third parties to provide payment processing services, including the processing of credit cards and debit cards and it could disrupt our business if these companies become unwilling or unable to provide these services to us. We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from consumers or facilitate other types of online payments, and our business and operating results could be adversely affected.

We are also subject to or voluntarily comply with a number of other laws and regulations relating to money laundering, international money transfers, privacy and information security and electronic fund transfers. If we were found to be in violation of applicable laws or regulations, we could be subject to civil and criminal penalties or forced to cease our payments services business.

Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include Groupons.

Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and regulations, such as the European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value cards. Examples of anti-money laundering requirements imposed on financial institutions include subscriber identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in part, upon the characteristics of Groupons and our role with respect to the distribution of Groupons to subscribers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access cards, including a proposed expansion of financial institutions to include sellers or issuers of prepaid access cards. In the event that this proposal is adopted as proposed, it is possible that a Groupon could be considered a financial product and that we could be a financial institution. In the event that we become subject to the requirements of the Bank Secrecy Act or any other anti-money laundering law or regulation imposing obligations on us as a money services business, our regulatory compliance costs to meet these obligations would likely increase which could reduce our net income.

State and foreign laws regulating money transmission could be expanded to include Groupons.

Many states and certain foreign jurisdictions impose license and registration obligations on those companies engaged in the business of money transmission, with varying definitions of what constitutes money transmission. We do not currently believe we are a money transmitter given our role and the product terms of Groupons. However, a successful challenge to our position or expansion of state or foreign laws could subject us to increased compliance costs and delay our ability to offer Groupons in certain jurisdictions pending receipt of any necessary licenses or registrations.

Current uncertainty in global economic conditions could adversely affect our revenue and business.

Our operations and performance depend on worldwide economic conditions, which deteriorated significantly in the United States and other countries in late 2008 and through 2009. The current economic environment continues to be uncertain. These conditions may make it difficult for our merchants to accurately forecast and plan future business activities, and could cause our merchants to terminate their relationships with us or could cause our subscribers to slow or reduce their spending. Furthermore, during challenging economic times, our merchants may face issues gaining timely access to sufficient credit, which could result in their unwillingness to continue with our service or impair their ability to make timely payments to us. If that were to occur, we may experience decreased revenue, be required to increase our allowance for doubtful accounts and our days receivables outstanding would be negatively impacted. If we are unable to finance our operations on acceptable terms as a result of renewed tightening in the credit markets, we may experience increased costs or we may not be able to effectively manage our business. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic

recovery, worldwide, in the United States or in our industry. These and other economic factors could have a material adverse effect on our financial condition and operating results.

Our management team has a limited history of working together and may not be able to execute our business plan.

Our management team has worked together for only a limited period of time and has a limited track record of executing our business plan as a team. We have recently filled a number of positions in our senior management and finance and accounting staff. Accordingly, certain key personnel have only recently assumed the duties and responsibilities they are now performing. In addition, certain of our executives have limited experience managing a large global business operation. Accordingly, it is difficult to predict whether our management team, individually and collectively, will be effective in operating our business.

Our management team has limited experience managing a public company, and regulatory compliance may divert its attention from the day-to-day management of our business.

The individuals who now constitute our management team have limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company that will be subject to significant regulatory oversight and reporting obligations under the federal securities laws. In particular, these new obligations will require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business, which could materially and adversely impact our business operations.

We will face increased legal, accounting, administrative and other costs and expenses as a public company that we do not incur as a private company. The Sarbanes-Oxley Act of 2002, including the requirements of Section 404, as well as new rules and regulations subsequently implemented by the Securities and Exchange Commission, or the SEC, the Public Company Accounting Oversight Board and the exchange on which our Class A common stock is listed, impose additional reporting and other obligations on public companies. We expect that compliance with these public company requirements will increase our costs and make some activities more time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we will adopt new internal controls and disclosure controls and procedures. In addition, we will incur additional expenses associated with our SEC reporting requirements. For example, under Section 404 of the Sarbanes-Oxley Act, for our annual report on Form 10-K for our fiscal year ending December 31, 2012, we will need to document and test our internal control procedures, our management will need to assess and report on our internal control over financial reporting and our independent registered public accounting firm will need to issue an opinion on the effectiveness of those controls. Furthermore, if we identify any issues in complying with those requirements (for example, if we or our accountants identify a material weakness or significant deficiency in our internal control over financial reporting), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect us, our reputation or investor perceptions of us. We also expect that it will be difficult and expensive to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Advocacy efforts by stockholders and third-parties may also prompt even more changes in corporate governance and reporting requirements. We expect that the additional reporting and other obligations imposed on us by these rules and regulations will increase our legal and financial compliance costs and the costs of our related legal, accounting and administrative activities significantly. These increased costs will require us to divert a significant amount of money that we could otherwise use to expand our business and achieve our strategic objectives.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

We may in the future be required to raise capital through public or private financing or other arrangements. Such financing may not be available on acceptable terms, or at all, and our failure to raise capital when needed could harm our business. Additional equity financing may dilute the interests of our common stockholders, and debt financing, if available, may involve restrictive covenants and could reduce our profitability. If we cannot raise funds on acceptable terms, we may not be able to grow our business or respond to competitive pressures.

Risks Related to the Securities Markets and Ownership of Our Class A Common Stock

Our Class A common stock has no prior market. We cannot assure you that our stock price will not decline after the offering.

Before this offering, there has not been a public market for our Class A common stock, and an active public market for our Class A common stock may not develop or be sustained after this offering. The market price of our Class A common stock could be subject to significant fluctuations after this offering. The price of our stock may change in response to variations in our operating results and also may change in response to other factors, including factors specific to technology companies, many of which are beyond our control. Among the factors that could affect our stock price are:

In particular, we cannot assure you that you will be able to resell your shares of our Class A common stock at or above the initial public offering price. The initial public offering price will be determined by negotiations between the representatives of the underwriters and us.

The concentration of our capital stock ownership with our founders, executive officers, employees and directors and their affiliates will limit your ability to influence corporate matters.

After this offering, our Class B common stock will have votes per share and our Class A common stock, which is the stock we are selling in this offering, will have one vote per share. We anticipate that our founders, executive officers, employees and directors and their affiliates will together own approximately % of our outstanding capital stock, representing approximately % of the voting power of our outstanding capital stock. In particular, following this offering, our founders, Eric P. Lefkofsky, Bradley A. Keywell and Andrew D. Mason, will control 100% of our outstanding Class B

common stock and approximately % of our outstanding Class A common stock, representing approximately % of the voting power of our outstanding capital stock. Messrs. Lefkofsky, Keywell and Mason will therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. In addition, because of this dual class structure, Messrs. Lefkofsky, Keywell and Mason will continue to be able to control all matters submitted to our stockholders for approval even if they own less than 50% of the outstanding shares of our capital stock. This concentrated control will limit your ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely affected.

Possible future sales of shares by our stockholders could negatively affect our stock price after this offering.

Sales of a substantial number of shares of our Class A common stock in the public market after this offering, or the perception that these sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities. Based on the total number of shares of our common stock outstanding as of March 31, 2011, upon completion of this offering, we will have shares of Class A common stock and 1,199,988 shares of Class B common stock outstanding, assuming no exercise of our outstanding options and the sale of shares of our Class A common stock to be sold by the selling stockholders.

All of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. Substantially all of the remaining shares of Class A common stock and 1,199,988 shares of Class B common stock outstanding after this offering, based on shares outstanding as of March 31, 2011, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for at least 180 days after the date of this prospectus (or such earlier date or dates as agreed between us and Morgan Stanley & Co. LLC), subject to certain extensions.

Morgan Stanley & Co. LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements prior to expiration of the lock-up period.

We have established our 2010 Stock Plan, originally effective April 16, 2010 and most recently amended on April 1, 2011, or the 2010 Plan. The 2010 Plan allows us to issue, among other things, stock options, restricted stock units and restricted stock to eligible employees (including our named executive officers), directors and advisors, as determined by the compensation committee of our board of directors. We also maintain the 2008 Stock Option Plan, originally effective January 15, 2008, or the 2008 Plan, pursuant to which stock options are currently outstanding (although no future awards may be granted under the 2008 Plan). We intend to file a registration statement under the Securities Act as soon as practicable after the completion of this offering to cover the issuance of shares upon the exercise of options granted under the 2010 Plan and the 2008 Plan, and of shares granted under the 2010 Plan. As a result, any shares issued or granted under the 2010 Plan after the completion of this offering also will be freely tradable in the public market, subject to lock-up agreements as applicable. If equity securities are issued under the 2010 Plan or the 2008 Plan and it is perceived that they will be sold in the public market, then the price of our Class A common stock could decline substantially.

We will have broad discretion in using our net proceeds from this offering, and the benefits from our use of the proceeds may not meet investors' expectations.

Our management will have broad discretion over the allocation of our net proceeds from this offering as well as over the timing of their use without stockholder approval. We have not yet determined how the net proceeds of this offering to be received by us that will be used, other than for working capital and other

general corporate purposes. As a result, investors will be relying upon management's judgment with only limited information about our specific intentions for the use of our net proceeds from this offering. Our failure to apply these proceeds effectively could cause our business to suffer.

If securities analysts do not publish research or if securities analysts or other third parties publish inaccurate or unfavorable research about us, the price of our Class A common stock could decline.

The trading market for our Class A common stock will rely in part on the research and reports that securities analysts and other third parties choose to publish about us. We do not control these analysts or other third parties. The price of our Class A common stock could decline if one or more securities analysts downgrade our Class A common stock or if one or more securities analysts or other third parties publish inaccurate or unfavorable research about us or cease publishing reports about us.

Because our existing investors paid substantially less than the initial public offering price when they purchased their shares, new investors will incur immediate and substantial dilution in their investment.

Investors purchasing shares of Class A common stock in this offering will incur immediate and substantial dilution in net tangible book value per share because the price that new investors pay will be substantially greater than the net tangible book value per share of the shares acquired. This dilution is due in large part to the fact that our existing investors paid substantially less than the initial public offering price when they purchased their shares of Class A common stock. In addition, upon the completion of this offering, there will be options to purchase 12,305,008 shares of our Class A common stock outstanding and restricted stock units with respect to 2,649,856 shares of Class A common stock, based on the number of options and restricted stock units outstanding on March 31, 2011. To the extent such options are exercised in the future, there will be further dilution to new investors.

The initial public offering price for the shares sold in this offering was determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. See "Underwriting" for a discussion of the determination of the initial public offering price.

We intend to retain all of our earnings for the foreseeable future to finance the operation and expansion of our business and do not anticipate paying cash dividends. As a result, you can expect to receive a return on your investment in our Class A common stock only if the market price of the stock increases.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws, as amended and restated upon the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

This prospectus includes forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time-to-time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Factors that may cause actual results to differ from expected results include, among others:

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

Unless otherwise indicated, information contained in this prospectus concerning our industry and the market in which we operate, including our general expectations and market position, market opportunity and market size, is based on information from various sources, on assumptions that we have made that are based on those data and other similar sources and on our knowledge of the markets for our offerings. These data involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. We have not independently verified any third-party information and cannot assure you of its accuracy or completeness. While we believe the market position, market opportunity and market size information included in this prospectus is generally reliable, such information is inherently imprecise. In addition, projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in "Risk Factors" and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

We estimate that our net proceeds from the sale of the Class A common stock offered by us will be approximately $ million, assuming an initial public offering price of $ per share, which is the midpoint of the range reflected on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters' option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $ , after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders. A $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease the net proceeds to us from the offering by approximately $ million, assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of one million shares in the number of shares of Class A common stock offered by us would increase or decrease the net proceeds to us from this offering by approximately $ million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to us from this offering for working capital and other general corporate purposes, which may include the acquisition of other businesses, products or technologies; however, we do not have any commitments for any acquisitions at this time. We will have broad discretion in the way we use the net proceeds. Pending use of the net proceeds as described above, we intend to invest the net proceeds in money market funds and investment grade debt securities.

We declared dividends on our preferred stock in the amounts of $0.3 million, $5.6 million and $1.4 million in 2008, 2009 and 2010, respectively. We declared dividends on our common stock in the amount of $21.3 million in 2009; we did not declare any dividends on our common stock in 2008 or 2010. We currently do not anticipate paying any cash dividends on our Class A common stock or Class B common stock in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant.

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2011 on:

The information below is illustrative only and our cash and cash equivalents and capitalization following the completion of this offering will be based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with "Management's

Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this prospectus.

			As of March 31, 2011

			Actual			Pro Forma	Pro Forma As Adjusted⁽¹⁾
			(unaudited) (in thousands)
Cash and cash equivalents			$	208,688		$	$

Total debt			$	—		$	$
Redeemable noncontrolling interests				2,744
Stockholders' (deficit) equity:
Common Stock
	Class A Common Stock, par value $0.0001 per share, no shares authorized, no shares issued and outstanding, actual; shares authorized, 296,140,145 shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted			—
	Class B Common Stock, par value $0.0001 per share, no shares authorized, no shares issued and outstanding, actual; shares authorized, 1,199,988 shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted			—
	Voting common stock, $0.0001 par value, 500,000,000 shares authorized, 211,495,998 shares issued and 144,681,311 shares outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			4
	Non-voting convertible common stock, $0.0001 par value, 100,000,000 shares authorized, 8,230,928 shares issued and 5,997,640 shares outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—
Preferred Stock
	Preferred Stock, par value $0.0001 per share, no shares authorized, issued and outstanding, actual; authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—
	Series B, convertible preferred stock, $0.0001 par value, 199,998 shares authorized, issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—
	Series D, convertible preferred stock, $0.0001 par value, 6,560,174 shares authorized and 5,956,420 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—
	Series E, convertible preferred stock, $0.0001 par value, 4,406,160 shares authorized and 4,060,183 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			—
	Series F, convertible preferred stock, $0.0001 par value, 4,202,658 shares authorized, issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			1
	Series G, convertible preferred stock, $0.0001 par value, 30,075,690 shares authorized, and 30,072,814 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted			3
Treasury stock				(856,723	)
Additional paid-in capital				1,373,173
Stockholder receivable				(144	)
Accumulated deficit				(522,136	)
Accumulated other comprehensive income				12,908

	Total Groupon, Inc. stockholders' equity			7,086

		Total capitalization	$	9,830		$	$

additional paid-in capital, total Groupon, Inc. stockholders' equity and total capitalization by approximately $ million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above excludes the following shares:

•: 1,199,988 shares of Class A common stock issuable upon the conversion of our Class B common stock that will be outstanding after this offering;
•: 12,305,008 shares of Class A common stock issuable upon the exercise of stock options outstanding as of March 31, 2011 at a weighted average exercise price of $2.23 per share;
•: 600,000 shares of Class A common stock issuable upon the vesting of performance stock units granted in connection with certain of our acquisitions;
•: 2,649,856 shares of Class A common stock issuable upon the vesting of restricted stock units granted under our 2010 Plan; and
•: 1,288,376 shares of Class A common stock available for additional grants under our 2010 Plan.

If you invest in our Class A common stock, your investment will be diluted immediately to the extent of the difference between the public offering price per share of our Class A common stock and the pro forma net tangible book value per share of our Class A and Class B common stock after this offering. Our pro forma net tangible book value as of March 31, 2011 was a deficit of approximately $(190.3) million, or $(0.64) per share of Class A and Class B common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets, less our total liabilities, divided by the number of shares of Class A and Class B common stock outstanding as of March 31, 2011, after giving effect to the recapitalization of all outstanding shares of our capital stock (other than our Series B preferred stock) into 296,140,145 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 1,199,988 shares of Class B common stock immediately prior to the closing of this offering.

Net tangible book value dilution per share to new investors represents the difference between the amount per share paid by purchasers of shares of Class A common stock in this offering and the pro forma net tangible book value per share of Class A and Class B common stock immediately after the completion of this offering. After giving effect to our sale of shares of Class A common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of March 31, 2011 would have been $ million, or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to investors purchasing Class A common stock in this offering, as illustrated in the following table:

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share by $ , assuming the number of shares offered by us remains the same as set forth on the cover page of this prospectus and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option to purchase additional shares of our Class A common stock in full, the pro forma as adjusted net tangible book value per share would be $ per share, the increase in pro forma net tangible book value per share to existing stockholders would be $ per share and the dilution per share to new investors purchasing shares in this offering would be $ per share.

The following table presents, on a pro forma basis as of March 31, 2011, after giving effect to the sale of shares of Class A common stock and recapitalization of all of our capital stock (other than our Series B preferred stock) into 296,140,145 shares of Class A common stock and all outstanding shares of our Series B preferred stock into 1,199,988 shares of Class B common stock immediately prior to the closing of this offering, the differences between the existing stockholders and the purchasers of shares in

this offering with respect to the number of shares purchased from us, the total consideration paid and the average price paid per share:

A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) total consideration paid by new investors by $ , total consideration paid by all stockholders by $ and the average price per share paid by all stockholders by $ , in each case assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and without deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The foregoing calculations are based on 296,140,145 shares of our Class A common stock outstanding as of March 31, 2011 and exclude:

Sales by the selling stockholders in this offering will cause the number of shares held by existing stockholders to be reduced to shares, or % of the total number of shares of our Class A and Class B common stock outstanding after this offering. If the underwriters' overallotment option is exercised in full, the number of shares held by the existing stockholders after this offering would be reduced to , or % of the total number of shares of our Class A and Class B common stock outstanding after this offering, and the number of shares held by new investors would increase to , or % of the total number of shares of our Class A common stock outstanding after this offering.

To the extent that any outstanding options are exercised or outstanding restricted stock units vest, new investors will experience further dilution. If all of these options were exercised and all of these restricted stock units vest, then our existing stockholders, including the holders of these options and restricted stock units, would own % and our new investors would own % of the total number of shares of our Class A and Class B common stock outstanding upon the closing of this offering. The net tangible book value per share after this offering would be $ , causing dilution to new investors of $ per share.

The following table presents selected consolidated financial and other data as of and for the periods indicated. Financial information for periods prior to 2008 has not been provided because we began operations in 2008. The statements of operations data for the years ended December 31, 2008, 2009 and 2010 and the balance sheet data as of December 31, 2009 and 2010 are derived from our audited financial statements included elsewhere in this prospectus. The balance sheet data for the year ended December 31, 2008 was derived from our unaudited financial statements which are not included in this prospectus. The summary consolidated statements of operations data for the periods ended March 31, 2010 and 2011 and the balance sheet data as of March 31, 2011 have been derived from our unaudited consolidated financials statements included elsewhere in this prospectus. The unaudited information was prepared on a basis consistent with that used to prepare our audited financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the unaudited period.

We made several acquisitions during 2010, including the acquisitions of CityDeal and Qpod.inc., or Qpod. The consolidated statements of operations, balance sheets and statements of cash flows include the results of entities acquired from the effective date of the acquisition for accounting purposes.

The following information should be read together with the more detailed information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the accompanying notes.

		Year Ended December 31,									Three Months Ended March 31,

		2008			2009			2010			2010			2011
											(unaudited)			(unaudited)
		(dollars in thousands, except share data)
Consolidated Statements of Operations Data:
Revenue		$	94		$	30,471		$	713,365		$	44,236		$	644,728
Cost of revenue			89			19,542			433,411			24,251			374,728

Gross profit			5			10,929			279,954			19,985			270,000
Operating expenses:
	Marketing		163			4,548			263,202			3,988			208,209
	Selling, general and administrative		1,474			7,458			233,913			7,426			178,939
	Acquisition-related		—			—			203,183			—			—

	Total operating expenses		1,637			12,006			700,298			11,414			387,148

(Loss) income from operations			(1,632	)		(1,077	)		(420,344	)		8,571			(117,148	)
Interest and other income (expense), net			90			(16	)		284			3			1,060
Equity-method investment activity, net of tax			—			—			—			—			(882	)

(Loss) income before provision for income taxes			(1,542	)		(1,093	)		(420,060	)		8,574			(116,970	)
Provision (benefit) for income taxes			—			248			(6,674	)		23			(3,079	)

Net (loss) income			(1,542	)		(1,341	)		(413,386	)		8,551			(113,891	)
Less: Net loss attributable to noncontrolling interests			—			—			23,746			—			11,223

Net (loss) income attributable to Groupon, Inc.			(1,542	)		(1,341	)		(389,640	)		8,551			(102,668	)
Dividends on preferred stock			(277	)		(5,575	)		(1,362	)		(523	)		—
Redemption of preferred stock in excess of carrying value			—			—			(52,893	)		—			(34,327	)
Adjustment of redeemable noncontrolling interests to redemption value			—			—			(12,425	)		—			(9,485	)
Preferred stock distributions			(339	)		—			—			—			—

Net (loss) income attributable to common stockholders		$	(2,158	)	$	(6,916	)	$	(456,320	)	$	8,028		$	(146,480	)

Net (loss) income per share
	Basic	$	(0.01	)	$	(0.04	)	$	(2.66	)	$	0.03		$	(0.95	)
	Diluted	$	(0.01	)	$	(0.04	)	$	(2.66	)	$	0.03		$	(0.95	)
Weighted average number of shares outstanding
	Basic		166,738,129			168,604,142			171,349,386			172,966,829			153,924,706
	Diluted		166,738,129			168,604,142			171,349,386			245,962,571			153,924,706

		As of December 31,

		As of December 31,									As of March 31, 2011
		2008			2009			2010			As of March 31, 2011
											(unaudited)
		(in thousands)
Consolidated Balance Sheet Data:
	Cash and cash equivalents	$	2,966		$	12,313		$	118,833		$	208,688
	Working capital (deficit)		2,643			3,988			(196,564	)		(228,748	)
	Total assets		3,006			14,962			381,570			541,410
	Total long-term liabilities		—			—			1,621			14,790
	Redeemable preferred stock		4,747			34,712			—			—
	Total Groupon, Inc. stockholders' (deficit) equity		(2,091	)		(29,969	)		8,077			7,086

Adjusted CSOI is operating income of our two segments, North America and International, adjusted for online marketing expense, acquisition-related costs and stock-based compensation expense. Online marketing expense primarily represents the cost to acquire new subscribers and is determined by the amount of subscriber growth we wish to pursue. Acquisition-related costs are non-recurring non-cash items related to certain of our acquisitions. Stock-based compensation expense is a non-cash item. We consider Adjusted CSOI to be 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. We believe it is important to view Adjusted CSOI as a complement to our entire consolidated statements of operations.

			Year Ended December 31,									Three Months Ended March 31,

			2008			2009			2010			2010		2011
			(in thousands)
(Loss) income from operations			$	(1,632	)	$	(1,077	)	$	(420,344	)	$	8,571	$	(117,148	)
	Adjustments:
	Online marketing			162			4,446			241,546			3,904		179,903
	Stock-based compensation			24			115			36,168			116		18,864
	Acquisition-related			—			—			203,183			—		—

		Total adjustments		186			4,561			480,897			4,020		198,767

Adjusted CSOI			$	(1,446	)	$	3,484		$	60,553		$	12,591	$	81,619

Adjusted Segment Operating Income:
North America			$	(1,446	)	$	3,484		$	88,036		$	12,591	$	38,610
International				—			—			(27,483	)		—	$	43,009

Adjusted CSOI			$	(1,446	)	$	3,484		$	60,553		$	12,591	$	81,619

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements about our business and operations. Our actual results may differ materially from those we currently anticipate as a result of many factors, including those we describe under "Risk Factors" and elsewhere in this prospectus. See "Special Note Regarding Forward-Looking Statements and Industry Data."

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 and promotions. 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.

Each day we email our subscribers discounted offers for goods and services that are targeted by location and personal preferences. Consumers access our deals directly through our websites and mobile applications. 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. In 2010, we generated revenue of $713.4 million, compared to $30.5 million in 2009. During the first quarter of 2011, we generated revenue of $644.7 million, compared to $44.2 million in the first quarter of 2010.

We have organized our operations into two principal segments: North America, which represents the United States and Canada; and International, which represents the rest of our global operations. For the first quarter of 2011, we derived 53.8% of our revenue from our International segment. We expect the percentage of total revenue derived from outside North America to increase in future periods as we continue to expand globally.

We incurred a net loss of $102.7 million for the three months ended March 31, 2011 and have an accumulated deficit of $522.1 million as of March 31, 2011. Since our inception, we have driven our growth through substantial investments in infrastructure and marketing to drive subscriber acquisition. We intend to continue to pursue a strategy of significant investment in these areas.

We measure our business with several financial and operating metrics. We use these metrics to assess the progress of our business, make decisions on where to allocate capital, time and technology investments, and assess longer-term performance of our marketplace. The key metrics are as follows:

The following table is a summary of our key operating metrics for the years ended December 31, 2008, 2009 and 2010 and the first quarters of 2010 and 2011:

Subscriber acquisition costs. We must continue to acquire and retain subscribers who purchase Groupons in order to increase revenue and achieve profitability. We characterize online marketing expenses as subscriber acquisition costs because these expenses are intended to acquire new subscribers. We spent $179.9 million on online marketing initiatives relating to subscriber acquisition for the first quarter of 2011 and expect to continue to expend significant amounts to acquire additional subscribers. If consumers do not perceive our Groupon offerings to be of high value and quality, or if we fail to introduce new or more relevant deals, we may not be able to acquire or retain subscribers. In our limited operating history, we have not incurred significant marketing or other expense on initiatives designed to re-activate subscribers or increase the level of purchases by our existing subscribers. If such expenditures or initiatives become necessary to maintain a desired level of activity in our marketplace, our business and profitability could be adversely affected.

Deal sourcing and quality. We consider our merchant relationships to be a vital part of our business model. We depend on our ability to attract and retain merchants that are prepared to offer products or services on compelling terms. We do not have long-term arrangements to guarantee availability of deals that offer attractive quality, value and variety to consumers or favorable payment terms to us. If new merchants do not find our marketing and promotional services effective, or if our existing merchants do not believe that utilizing our services provides them with a long-term increase in customers, revenues or profits, they may stop making offers through our marketplace.

Competitive pressure. Our growth and geographical expansion have drawn a significant amount of attention to our business model. As a result, a substantial number of group buying sites that attempt to replicate our business model have emerged around the world. In addition to such competitors, we expect to increasingly compete against other large internet and technology-based businesses, such as Facebook, Google and Microsoft, each of which has launched initiatives which are directly competitive to our business. We also expect to compete against other internet sites that are focused on specific communities or interests and offer coupons or discount arrangements related to such communities or interests.

Investment in growth. We are a high-growth company and have aggressively invested, and intend to continue to invest, to support this growth. As a result, we have incurred net losses in the majority of quarters since our inception. We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to increase the number and variety of deals we offer each day, broaden

our subscriber base, expand our marketing channels, expand our operations, hire additional employees and develop our technology.

Pace and effectiveness of expansion. We have grown our business rapidly since inception, adding new subscribers and markets both domestically and internationally. Our international business has become critical to our revenue growth and our ability to achieve profitability. In 2010 and the first quarter of 2011, 37.2% and 53.8%, respectively, of our revenue was generated from our international operations. Expansion into international markets requires management attention and resources and requires us to localize our services to conform to a wide variety of local cultures, business practices, laws and policies. International acquisitions also expose us to a variety of execution risks. The different commercial and internet infrastructure in other countries may make it more difficult for us to replicate our traditional business model.

Revenue primarily consists of the gross amount paid by customers for purchased Groupons, excluding any applicable taxes, less customer refunds and obligations related to credits earned for customer loyalty and reward programs.

Cost of revenue primarily consists of the amounts paid to and accrued for our merchants associated with the sale of Groupons.

We direct consumers to our websites and applications primarily through a number of targeted online marketing channels, such as sponsored search, social networking sites, portal advertising, email marketing campaigns, affiliate programs and other similar initiatives, which we consider to be subscriber acquisition costs. Our marketing expenses are largely variable, impacted by the amount of subscriber growth we wish to pursue and changes in online marketing rates. To the extent there is increased or decreased competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding change in our marketing expense. We also incur offline marketing costs from television, radio and print advertising.

Marketing is the primary method by which we acquire subscribers, and as such, is a critical part of our growth strategy. Over time, as our business continues to scale and we become more established in a greater percentage of our markets, we expect that our marketing expense will decrease as a percentage of revenue.

Selling, general and administrative expense primarily consists of wages and benefits (including stock-based compensation), credit card processing fees, consulting and professional fees, depreciation and amortization and technology-related costs. Approximately 50% of our employees were part of our salesforce as of March 31, 2011, and their compensation represented a significant portion of our selling, general and administrative expenses. Our salesforce is critical to growing and maintaining our merchant base and is the main source for driving new Groupon offers. We expect that our salesforce headcount will continue to grow over time as we continue to expand our business into new markets, but that our sales and marketing expense will decrease as a percentage of revenue.

In May 2010, we acquired CityDeal, a European-based collective buying power business launched in January 2010 that provided daily deals and online marketing services substantially similar to the Company. As part of the overall consideration paid, we were obligated to issue additional shares of our common stock in December 2010 due to the achievement of financial and performance earn-out targets. We recorded a liability on our consolidated balance sheet as of the original acquisition date for this consideration and subsequently remeasured the liability on a periodic basis until final settlement. As a result of this remeasurement, we recorded a total charge of $204.2 million in acquisition-related expenses in 2010, which was partially offset by other nominal acquisition-related items.

Interest and other income (expense) primarily consists of foreign currency gains and losses resulting from foreign currency transactions which are denominated in currencies other than our functional currencies and interest expense on our loans from related parties.

		Three Months Ended March 31,

		2010			2011
		(in thousands)
Revenue		$	44,236		$	644,728
Cost of revenue			24,251			374,728

Gross profit			19,985			270,000
Operating expenses:
	Marketing		3,988			208,209
	Selling, general and administrative		7,426			178,939

	Total operating expenses		11,414			387,148

Income (loss) from operations			8,571			(117,148	)
Interest and other income, net			3			1,060
Equity-method investment activity, net of tax			—			(882	)

Income (loss) before provision for income taxes			8,574			(116,970	)
Provision (benefit) for income taxes			23			(3,079	)

Net income (loss)			8,551			(113,891	)
Less: Net loss attributable to noncontrolling interests			—			11,223

Net income (loss) attributable to Groupon, Inc.			8,551			(102,668	)
Dividends on preferred stock			(523	)		—
Redemption of preferred stock in excess of carrying value			—			(34,327	)
Adjustment of redeemable noncontrolling interests to redemption value			—			(9,485	)

Net income (loss) attributable to common stockholders		$	8,028		$	(146,480	)

The following table reflects all of the line items of our statements of operations as a percentage of revenue for the three months ended March 31, 2010 and 2011:

		Three Months Ended March 31,

		2010			2011
Revenue			100.0	%		100.0	%
Cost of revenue			54.8			58.1

Gross profit			45.2			41.9
Operating expenses:
	Marketing		9.0			32.3
	Selling, general and administrative		16.8			27.8

	Total operating expenses		25.8			60.1

Income (loss) from operations			19.4			(18.2	)
Interest and other income, net			—			0.2
Equity-method investment activity, net of tax			—			(0.1	)

Income (loss) before provision for income taxes			19.4			(18.1	)
Provision (benefit) for income taxes			0.1			(0.4	)

Net income (loss)			19.3			(17.7	)
Less: Net loss attributable to noncontrolling interests			—			1.8

Net income (loss) attributable to Groupon, Inc.			19.3			(15.9	)
Dividends on preferred stock			(1.2	)		—
Redemption of preferred stock in excess of carrying value			—			(5.3	)
Adjustment of redeemable noncontrolling interests to redemption value			—			(1.5	)

Net income (loss) attributable to common stockholders			18.1	%		(22.7	)%

For the three months ended March 31, 2010 and 2011, our revenue was $44.2 million and $644.7 million respectively, reflecting an increase of $600.5 million, or 1,357%. The increase in revenue was directly attributable to the increase in the number of Groupons we sold in the period compared to the same period of the prior year. The increase in the number of Groupons sold was driven by subscriber growth in our existing markets and our entry into new markets. In May 2010, we also began our international expansion by acquiring CityDeal, which added 1.9 million subscribers as of the date of the acquisition in several major European markets, including London, Berlin and Paris, and ended the year with operations in 38 countries. As a result of the entry into these new markets and growth in existing markets we added 79.7 million new subscribers from March 31, 2010 through March 31, 2011.

We had no international operations during the three months ended March 31, 2010. Subsequent to March 31, 2010, we added 132 new North American markets and continued to grow in existing markets. Revenue for our International segment was $346.8 million for the three months ended March 31, 2011. In May 2010, we commenced our operations internationally with the purchase of CityDeal, a European-based local e-commerce business similar to ours, which operated in 80 markets in 16 countries with 1.9 million subscribers at the time of acquisition. We subsequently completed eight additional international acquisitions during 2010, which gave us access to markets and additional subscribers around the world.

Cost of revenue as a percentage of revenue was 54.8% and 58.1% for the three months ended March 31, 2010 and 2011, respectively. The significant increase in the absolute cost of revenue is consistent with the growth of our revenue.

Gross profit and gross margin for each of the periods presented were as follows:

Gross margin decreased as a percentage of revenue from 45.2% for the three months ended March 31, 2010 to 41.9% for the three months ended March 31, 2011. The decrease in gross margin was primarily due to the mix of offered deals. We also offered several national deals to generate revenue and increase brand awareness, which reduced our gross margin.

Marketing expense as a percentage of revenue for the three months ended March 31, 2010 and 2011 was 9.0% and 32.3%, respectively. Our marketing expense increased by $204.2 million to $208.2 million for the three months ended March 31, 2011 as compared to March 31, 2010 primarily driven by investments in subscriber acquisition in new markets. We have focused the majority of our marketing spend online, particularly on social networking websites and search engines as part of our new subscriber acquisition strategy. For the three months ended March 31, 2011, marketing expense as a percentage of revenue for the North America and International segments was 26.4% and 37.3%, respectively. The higher marketing expense as a percentage of revenue for our International segment reflects our launch into new International markets.

Selling, general and administrative expense as a percentage of revenue was 16.8% and 27.8% for the three months ended March 31, 2010 and 2011, respectively. The increase in selling, general and administrative expense as a percentage of revenue was principally related to the build out of our salesforce and investments in our corporate infrastructure necessary to support our current and anticipated growth.

Our selling, general and administrative expense increased by $171.5 million to $178.9 million for the three months ended March 31, 2011 as compared to March 31, 2010.

Wages and benefits (excluding stock-based compensation) increased by $77.7 million to $81.2 million for the three months ended March 31, 2011 as compared to March 31, 2010, as we continued to add sales and administrative staff to support our business. Stock-based compensation costs also increased to

$18.9 million for the three months ended March 31, 2011 from $0.1 million for the three months ended March 31, 2010 due to awards issued to retain key employees and awards issued in connection with our acquisitions. Credit card processing fees have also increased consistent with revenue, as this cost is generally variable based on the dollar volume of transactions that are processed. Our consulting and professional fees increased as a percentage of revenue in the three months ended March 31, 2011 as compared to March 31, 2010, primarily related to higher legal and technology-related costs. Depreciation and amortization expense increased as a percentage of revenue in the three months ended March 31, 2011 as compared to March 31, 2010 primarily because we recorded $53.1 million of intangible assets in connection with our acquisitions, resulting in $5.7 million of amortization expense for the three months ended March 31, 2011.

For the three months ended March 31, 2011, we generated other income of $1.1 million primarily related to foreign currency gains. We did not incur any foreign currency gains or losses for the three months ended March 31, 2010 as we did not have any international operations during the first quarter of 2010.

The provision for income taxes for the three months ended March 31, 2010 was nominal due to the size of our operations. We recorded a benefit for income taxes for the three months ended March 31, 2011 as the Company was able to benefit losses in certain foreign jurisdictions.

			Year Ended December 31,

			2008			2009			2010
			(in thousands)
Revenue			$	94		$	30,471		$	713,365
Cost of revenue				89			19,542			433,411

Gross profit				5			10,929			279,954
Operating expenses:
	Marketing			163			4,548			263,202
	Selling, general and administrative			1,474			7,458			233,913
	Acquisition-related			—			—			203,183

		Total operating expenses		1,637			12,006			700,298

Loss from operations				(1,632	)		(1,077	)		(420,344	)
Interest and other income (expense), net				90			(16	)		284

Loss before provision for income taxes				(1,542	)		(1,093	)		(420,060	)
Provision (benefit) for income taxes				—			248			(6,674	)

Net loss				(1,542	)		(1,341	)		(413,386	)
Less: Net loss attributable to noncontrolling interests				—			—			23,746

Net loss attributable to Groupon, Inc.				(1,542	)		(1,341	)		(389,640	)
Dividends on preferred stock				(277	)		(5,575	)		(1,362	)
Redemption of preferred stock in excess of carrying value				—			—			(52,893	)
Adjustment of redeemable noncontrolling interests to redemption value				—			—			(12,425	)
Preferred stock distributions				(339	)		—			—

Net loss attributable to common stockholders			$	(2,158	)	$	(6,916	)	$	(456,320	)

The following table reflects all of the line items of our statements of operations as a percentage of revenue for the years ended December 31, 2008, 2009 and 2010:

			Year Ended December 31,

			2008			2009			2010
Revenue				100.0	%		100.0	%		100.0	%
Cost of revenue				94.7			64.1			60.8

Gross profit				5.3			35.9			39.2
Operating expenses:
	Marketing			*			14.9			36.8
	Selling, general and administrative			*			24.5			32.8
	Acquisition-related			—			—			28.5

		Total operating expenses		*			39.4			98.1

Loss from operations				*			(3.5	)		(58.9	)
Interest and other income (expense), net				95.7			(0.1	)		—

Loss before provision for income taxes				*			(3.6	)		(58.9	)
Provision (benefit) for income taxes				—			0.8			(1.0	)

Net loss				*			(4.4	)		(57.9	)
Less: Net loss attributable to noncontrolling interests				—			—			3.3

Net loss attributable to Groupon, Inc.				*			(4.4	)		(54.6	)
Dividends on preferred stock				*			(18.3	)		(0.2	)
Redemption of preferred stock in excess of carrying value				—			—			(7.4	)
Adjustment of redeemable noncontrolling interests to redemption value				—			—			(1.7	)
Preferred stock distributions				*			—			—

Net loss attributable to common stockholders				*	%		(22.7	)%		(63.9	)%

For the years ended December 31, 2008, 2009 and 2010, our revenue was $0.1 million, $30.5 million and $713.4 million, respectively, reflecting growth rates of 32,316% and 2,241%, respectively, as compared to the corresponding prior year.

2010 compared to 2009. In 2010, our revenue increased $682.9 million to $713.4 million, an increase of 2,241%. As the average revenue per Groupon remained relatively consistent year-to-year, the overall increase in revenue was directly attributable to the increase in volume of Groupons that we sold. The increase in the number of Groupons sold was driven by subscriber growth in our existing markets and our entry into new markets. During 2010, we added 124 new North American markets and 48.8 million new subscribers. In 2010, we also began our international expansion by acquiring CityDeal, which added 1.9 million subscribers as of the date of the acquisition in several major European markets, including London, Berlin and Paris. We ended the year with operations in 38 countries.

2009 compared to 2008. In 2009, our revenue increased by $30.4 million to $30.5 million, an increase of 32,316%. 2009 was our first full year of operations, and during the period we added 29 North American markets and 1.8 million subscribers. Significant markets entered in 2009 included Boston, Los Angeles and New York.

In addition to expanding the scale of our business domestically and internationally through acquisitions and entering new markets, we have several other initiatives that have driven revenue growth

over the last three years. We have increased our total marketing spend significantly, focusing on acquiring subscribers through online channels such as social networking websites and search engines. We also have added substantially to our salesforce, allowing us to increase the number of merchant relationships and offer more deals on a daily basis on our websites and higher quality deals to subscribers.

Revenue for our International segment was $265.0 million for the year ended December 31, 2010. In May 2010, we commenced our operations internationally with the purchase of CityDeal, a European-based local e-commerce website similar to ours, which operated in 80 markets in 16 countries with 1.9 million subscribers at the time of acquisition. We subsequently completed eight additional international acquisitions during 2010, which gave us access to markets and additional subscribers around the world.

Cost of revenue as a percentage of revenue was 94.7%, 64.1% and 60.8% for the years ended December 31, 2008, 2009 and 2010, respectively. The significant increase in absolute cost of revenue is consistent with the growth of our revenue.

2010 compared to 2009. In 2010, our cost of revenue increased by $413.9 million to $433.4 million, an increase of 2,118%. As compared to 2009, the cost of revenue was lower as a percentage of revenue as demand for our services allowed us to be more selective in the merchant deals we chose to offer while maintaining or improving our merchant terms.

2009 compared to 2008. In 2009, our cost of revenue increased to $19.5 million, an increase of 21,857%. Cost of revenue as a percentage of revenue for the year ended December 31, 2008 was not indicative of normal operating levels due to the small number of transactions processed in that period as we started selling Groupons in November 2008.

Consolidated gross profit and gross margin for each of the years presented were as follows:

Gross margin increased from 35.9% for the year ended December 31, 2009 to 39.2% for the year ended December 31, 2010. The increase in gross margin was due to a higher purchasing rate of offered deals and our ability to maintain or improve our merchant terms. We from time to time offer national deals to generate revenue and increase brand awareness which typically generate a lower gross margin. To date, these transactions have not had a material impact on our results of operations. Additionally, to date we have achieved higher overall gross margins for our International segment.

Marketing expense as a percentage of revenue for the years ended December 31, 2009 and 2010 was 14.9% and 36.8%. Over time, as our business continues to scale and we become more established in a greater percentage of our markets, we expect that our marketing expense will decrease as a percentage of revenue.

2010 compared to 2009. In 2010, our marketing expense increased by $258.7 million to $263.2 million, an increase of 5,687%. The significant increase was attributable to an increase in online marketing spend, particularly on social networking websites and search engines as part of our new subscriber acquisition strategy. For the year ended December 31, 2010, marketing expense as a percentage of revenue for the North America and International segments was 23.4% and 59.6%, respectively. In 2010, we made significant marketing investments in our International segment to accelerate growth and establish our presence in new markets.

2009 compared to 2008. In 2009, our marketing expense increased by $4.4 million to $4.5 million, an increase of 2,690%. Marketing expense as a percentage of revenue for the year ended December 31, 2008 is not indicative of normal operating levels due to the small number of transactions processed in 2008 as we started selling Groupons in November 2008.

Selling, general and administrative expense as a percentage of revenue was 24.5% and 32.8% for the years ended December 31, 2009 and 2010, respectively. The increases in selling, general and administrative expense as a percentage of revenue were principally related to the build out of our salesforce and investments in our corporate infrastructure necessary to support our current and anticipated growth. Over time, as our operations mature in a greater percentage of our markets, we expect that our selling, general and administrative expense will decrease as a percentage of revenue.

2010 compared to 2009. In 2010, our selling, general and administrative expense increased by $226.5 million to $233.9 million, an increase of 3,036%. As described below, the increase in selling, general and administrative expense for the year ended December 31, 2010 compared to the year ended December 31, 2009 was due to increases in wages and benefits, credit card processing fees, consulting and professional fees and depreciation and amortization expenses.

Wages and benefits (excluding stock-based compensation) increased by $87.6 million to $91.3 million in the year ended December 31, 2010 as we continued to add sales and administrative staff to support our business. Stock-based compensation costs also increased to $36.2 million for the year ended December 31, 2010 from $0.1 million for the year ended December 31, 2009 due to awards issued to retain key employees and awards issued in connection with our acquisitions. Credit card processing fees have also increased consistent with revenue, as this cost is generally variable based on the dollar volume of transactions that are processed. Our consulting and professional fees increased as a percentage of revenue in 2010 primarily related to higher legal and technology-related costs. Depreciation and amortization expense increased as a percentage of revenue in 2010 primarily because we recorded $47.3 million of intangible assets in connection with our acquisitions, resulting in $11.0 million of amortization expense.

2009 compared to 2008. In 2009, our selling, general and administrative expense increased by $6.0 million to $7.5 million, an increase of 406%. Selling, general and administrative expense as a percentage of revenue for the year ended December 31, 2008 is not indicative of normal operating levels due to the small number of transactions processed in 2008 as we started selling Groupons in November 2008.

In May 2010, we acquired CityDeal, a European-based collective buying power business similar to ours. As part of the overall consideration paid, we were obligated to issue additional shares of our common stock in December 2010 due to the achievement of financial and performance earn-out targets. We recorded a liability on our consolidated balance sheet as of the original acquisition date for this consideration and subsequently remeasured the liability on a periodic basis until final settlement. As a result of this remeasurement, we recorded a total expense of $204.2 million as acquisition-related expenses, which was partially offset by other nominal acquisition-related items.

For the year ended December 31, 2010 we had other income of $0.5 million related to foreign currency gains. We did not incur any foreign currency gains or losses for the years ended December 31, 2008 and 2009 as we did not have any international operations until 2010. We also recorded $0.4 million of interest expense for the year ended December 31, 2010 related to interest on loans from related parties.

The provision for income taxes for the years ended December 31, 2008 and 2009 was nominal due to the size of our operations. We recorded a benefit for income taxes for the year ended December 31, 2010 as the Company was able to benefit losses in certain foreign jurisdictions.

The following table represents data from our unaudited statements of operations and our key operating metrics for our most recent nine quarters. You should read the following table in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. The results of operations of any quarter are not necessarily indicative of the results that may be expected for any future period.

		Three Months Ended

		Mar. 31, 2009			June 30, 2009			Sept. 30, 2009			Dec. 31, 2009			Mar. 31, 2010			June 30, 2010			Sept. 30, 2010			Dec. 31, 2010			Mar. 31, 2011
		(unaudited)
		(dollars in thousands)
Consolidated Statements of Operations Data:
Revenue		$	252		$	3,301		$	9,998		$	16,920		$	44,236		$	87,298		$	185,231		$	396,600		$	644,728
Gross profit		$	83		$	1,209		$	3,996		$	5,641		$	19,985		$	34,373		$	72,287		$	153,309		$	270,000
	Percentage of revenue		32.9	%		36.6	%		40.0	%		33.3	%		45.2	%		39.4	%		39.0	%		38.7	%		41.9	%
(Loss) income from operations		$	(316	)	$	17		$	848		$	(1,626	)	$	8,571		$	(36,819	)	$	(55,967	)	$	(336,129	)	$	(117,148	)
	Percentage of revenue		(125.4	)%		0.5	%		8.5	%		(9.6	)%		19.4	%		(42.2	)%		(30.2	)%		(84.8	)%		(18.2	)%
Net (loss) income attributable to Groupon, Inc.		$	(309	)	$	21		$	850		$	(1,903	)	$	8,551		$	(35,929	)	$	(49,032	)	$	(313,230	)	$	(102,668	)
	Percentage of revenue		(122.6	)%		0.6	%		8.5	%		(11.2	)%		19.3	%		(41.2	)%		(26.5	)%		(79.0	)%		(15.9	)%
Key operating metrics:
Subscribers⁽¹⁾			*			152,203			627,051			1,807,278			3,434,610			10,445,521			21,369,608			50,583,805			83,100,006
Cumulative customers⁽²⁾			6,840			43,014			153,471			375,099			874,017			2,379,611			4,623,267			9,031,807			15,803,995
Featured merchants⁽³⁾			74			212			765			1,644			2,903			9,565			18,722			35,099			56,781
Groupons sold⁽⁴⁾			27,221			116,231			340,471			764,869			1,760,398			4,062,458			8,237,733			16,235,481			28,094,743

Our gross margin and overall operating results fluctuate from quarter to quarter as a result of a variety of factors. We have experienced exceptional growth since our inception as well as significant changes in our business. For instance, we have entered into many new markets, made several international acquisitions, and increased our merchant and subscriber base over the last three years. These changes have resulted in substantial growth in revenue and corresponding increases in cost of revenue and operating expenses to support our growth. Our growth has led to uneven overall operating results due to differences in the terms and types of deals that we offer, changes in our investment in marketing from quarter-to-quarter, increases in employee headcount and the impact of our acquisitions. We have determined in the past, and expect to continue to determine in the future, to undertake substantial marketing expense increases when we perceive opportunities to enter new markets or penetrate existing markets more deeply. The return on these investments is generally achieved in future periods and, as a result, these investments can adversely impact near term results. For example, although we generated net income in the first quarter of 2010, we subsequently pursued a much more aggressive growth strategy, including rapid international expansion, acquisitions and a substantial increase in our marketing expenses. This has resulted in losses from operations for the three months ended June 30, 2010, September 30, 2010, December 31, 2010 and March 31, 2011.

In addition, our business is directly affected by the behavior of our merchants and subscribers. Economic conditions and competitive pressures can positively and negatively impact the types of deals that we can offer and the rate at which they are purchased. Consequently, the results of any prior quarterly or annual periods should not be relied upon as indications of our future operating performance.

As of March 31, 2011, we had $208.7 million in cash and cash equivalents, which primarily consisted of cash and money market accounts.

Since our inception, we have funded our working capital requirements and expansion primarily through private sales of common and preferred stock, yielding net proceeds of $1.1 billion. We used $941.7 million of the proceeds from these sales to redeem shares of our common and preferred stock, and the remainder to fund acquisitions and for working capital and general corporate purposes. We generated positive cash flow from operations for the years ended December 31, 2009 and December 31, 2010 and the three months ended March 31, 2011 despite experiencing net losses in each of these periods, and we expect annual cash flow from operations to remain positive in the foreseeable future. We generally use this cash flow to fund our operations, make additional acquisitions, purchase capital expenditures and meet our other cash operating needs. Cash flow from operations was $7.5 million for the year ended December 31, 2009, $86.9 million for the year ended December 31, 2010 and $17.9 million for the three months ended March 31, 2011.

Although we can provide no assurances, we believe that the net proceeds from this offering, together with our available cash and cash equivalents balance and cash generated from operations, should be sufficient to meet our working capital requirements and other capital expenditures for the next twelve months.

Our priority in 2011 is to continue to increase our revenue and improve our gross profit through organic growth of our overall marketplace, coupled with continued expansion and penetration into new domestic and international markets. We also intend to expand our sales force and aggressively market our products, and to acquire or make strategic investments in complementary businesses that add to our subscriber or customer base or provide incremental technology. In order to support our overall global business expansion, we also expect to make significant investments in our systems, data centers, corporate

facilities and information technology infrastructure, with approximately $65 million of capital expenditures planned for the year ended December 31, 2011. We currently plan to fund these expenditures with cash flows generated from operations during this period. We also may use a portion of the net proceeds from this offering to fund these uses of cash. We do not intend to pay dividends in the foreseeable future.

Our net cash flow from operating, investing and financing activities for the periods below were as follows (in thousands):

	Year Ended December 31,									Three Months Ended March 31,

	2008			2009			2010			2010			2011
	(in thousands)
Cash provided by (used in):
Operating activities	$	(1,526	)	$	7,510		$	86,885		$	12,897		$	17,940
Investing activities		(19	)		(1,961	)		(11,879	)		(663	)		(44,294	)
Financing activities		4,408			3,798			30,445			2			112,106
Effect of changes in exchange rates on cash and cash equivalents		—			—			1,069			—			4,103

Net increase in cash and cash equivalents	$	2,863		$	9,347		$	106,520		$	12,236		$	89,855

Cash provided by (used in) operating activities primarily consists of our net loss adjusted for certain non-cash items, including depreciation and amortization, stock-based compensation, deferred income taxes, acquisition-related expenses and the effect of changes in working capital and other items.

Our current merchant arrangements are structured such that we collect cash up front when our customers purchase Groupons and make payments to most of our merchants at a subsequent date. Under our traditional merchant payment model, we pay our merchants in installments over a period of generally sixty days for all Groupons purchased. Under the redemption payment model, which is utilized in most of our international operations, merchants are not paid until the customer redeems the Groupon that has been purchased. As a result of these payment models, we experience swings in merchant payables depending on the absolute level of our cost of revenue during the last few weeks of each quarter. This can cause volatility in working capital levels and impact cash balances more or less than our operating income or loss would indicate. To the extent we offer our merchants more favorable or accelerated payment terms or our revenue does not continue to grow in the future, our cash flow could be adversely impacted.

For the three months ended March 31, 2011, our net cash provided by operating activities of $17.9 million consisted of net loss of $113.9 million, offset by $23.9 million in adjustments for non-cash items and $107.9 million in cash provided by changes in working capital and other activities. Adjustments for non-cash items primarily consisted of $18.9 million in stock-based compensation expense, $1.9 million in depreciation expense on property and equipment and $5.7 million in amortization of intangible assets, partially offset by $3.4 million in deferred income taxes. The increase in cash resulting from changes in working capital activities primarily consisted of a $121.2 million increase in our merchant payables, due to the growth in the number of Groupons sold, and a $36.2 million increase in accrued expenses and other current liabilities primarily related to online marketing costs incurred to acquire subscribers and operational expenses such as payroll and benefits, customer refunds and costs associated with customer loyalty and reward programs. These increases were partially offset by a decrease in operating cash flow due to a $22.5 million decrease in accounts payable, due to the timing of invoices received and paid, a $16.0 million increase in accounts receivable, a $8.3 million increase in prepaid expenses and other current assets and a $3.9 million increase in other assets and liabilities. Increases in accrued expenses, accounts

receivable and other assets and liabilities primarily reflect the significant increase in the number of employees, vendors, and subscribers resulting from our internal growth and global expansion through recent acquisitions.

For the three months ended March 31, 2010, our net cash provided by operating activities of $12.9 million consisted of net income of $8.6 million, $4.1 million in cash provided by changes in working capital and other activities and $0.2 million in adjustments for non-cash items. The increase in cash resulting from changes in working capital primarily consisted of an increase in accrued merchant payables resulting from internal business growth.

For the year ended December 31, 2010, our net cash provided by operating activities of $86.9 million consisted of a net loss of $413.4 million, offset by $245.1 million in adjustments for non-cash items and $255.2 million in cash provided by changes in working capital and other activities. Adjustments for non-cash items primarily consisted of $203.2 million in acquisition-related expenses, $36.2 million in stock-based compensation expense, $1.9 million in depreciation expense on property and equipment and $11.0 million in amortization of intangible assets, partially offset by $7.3 million in deferred income taxes. The increase in cash resulting from changes in working capital activities primarily consisted of a $149.0 million increase in our merchant payables, due to the growth in the number of Groupons sold, a $94.6 million increase in accrued expenses and other current liabilities primarily related to online marketing costs incurred to acquire subscribers and operational expenses such as payroll and benefits, customer refunds and costs associated with customer loyalty and reward programs, and a $50.8 million increase in accounts payable. These increases were partially offset by a decrease in operating cash flow due to a $34.9 million increase in accounts receivable, a $2.5 million increase in prepaid expenses and other current assets and a $1.5 million increase in other assets and liabilities. Increases in accrued expenses, accounts payable, accounts receivable and other assets and liabilities primarily reflect the significant increase in the number of employees, vendors, and subscribers resulting from our internal growth and global expansion through recent acquisitions.

For the year ended December 31, 2009, our net cash provided by operating activities of $7.5 million was comprised of a net loss of $1.3 million, offset by $8.8 million in cash provided by working capital and other items. The increase in cash resulting from changes in working capital primarily consisted of an increase in accrued merchant payable and accrued expenses resulting from internal business growth.

For the year ended December 31, 2008, our net cash used in operating activities of $1.5 million primarily reflected our net loss of $1.5 million.

Cash used in investing activities primarily consists of capital expenditures, acquisitions of businesses and changes in the balances of restricted stock.

For the three months ended March 31, 2011, our net cash used in investing activities of $44.3 million primarily consisted of $30.3 million invested in subsidiaries and equity interests, $11.0 million in purchases of capital expenditures and $2.8 million in net cash paid in business acquisitions.

For the three months ended March 31, 2010, our net cash used in investing activities of $0.7 million primarily consisted of the purchases of capital expenditures.

For the year ended December 31, 2010, our net cash used in investing activities of $11.9 million was primarily comprised of $14.7 million in capital expenditures, partially offset by $3.8 million in net cash received from acquisitions. The capital expenditures reflect the significant growth of the business domestically and internationally. We received net cash from our acquisitions in 2010, as a significant portion of the purchase price paid consisted of stock and contingent consideration.

For the year ended December 31, 2009, our net cash used in investing activities of $2.0 million primarily reflected a $1.4 million change in restricted cash related to cash paid for a security agreement with our merchant processor and a letter of credit for a facility lease agreement.

Cash provided by financing activities primarily consists of net proceeds from the issuance of common and preferred stock and the exercise of stock options by employees, net of the repurchase of founders' stock, common stock and preferred stock held by certain stockholders.

For the three months ended March 31, 2011, our net cash provided by financing activities of $112.1 million was driven primarily by net cash proceeds from the issuance of common and preferred stock of $509.7 million. We used $348.6 million of the proceeds to repurchase our common stock, $35.0 million to redeem shares of our preferred stock and $13.6 million to pay our related party loans incurred in connection with the CityDeal acquisition.

For the year ended December 31, 2010, our net cash provided by financing activities of $30.4 million was driven primarily by net cash proceeds from the issuance of preferred stock of $584.7 million. We used $503.2 million of the proceeds to repurchase our common stock, $55.0 million to redeem shares of our preferred stock, and $1.3 million to pay dividends to our preferred stockholders. In addition, we received $5.0 million from related party loans throughout 2010.

For the year ended December 31, 2009, our net cash provided by financing activities of $3.8 million was due primarily to $29.9 million of net cash proceeds from the sale and issuance of preferred stock, of which $26.4 million was used to fund a special dividend to certain holders of our capital stock.

For the year ended December 31, 2008, our net cash provided by financing activities of $4.4 million reflected $4.7 million in net proceeds from the sale and issuance of preferred stock.

The following table summarizes our future contractual obligations and commitments as of March 31, 2011:

We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business, including the effect of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

We transact business in various foreign currencies other than the U.S. dollar, principally the euro, British pound sterling and Japanese yen, which exposes us to foreign currency risk. For the first quarter of 2011, we derived approximately 53.8% of our revenue from international customers and we expect the percentage of total revenue derived from outside the United States to increase in future periods as we continue to expand globally. Revenue and related expenses generated from our international operations are denominated in the functional currencies of the corresponding country. The functional currency of our subsidiaries that either operate or support these markets is generally the same as the corresponding local currency. The results of operations of, and certain of our intercompany balances associated with, our international operations are exposed to foreign exchange rate fluctuations. Upon consolidation, as exchange rates vary, our revenue and other operating results may differ materially from expectations, and we may record significant gains or losses on the remeasurement of intercompany balances.

We assess our market risk based on changes in foreign currency exchange rates utilizing a sensitivity analysis that measures the potential impact in earnings, fair values and cash flows based on a hypothetical 10% change (increase and decrease) in currency rates. We use a current market pricing model to assess the changes in the value of the U.S. dollar on foreign currency denominated monetary assets and liabilities. The primary assumption used in these models is a hypothetical 10% weakening or strengthening of the U.S. dollar against all our currency exposures as of March 31, 2011.

We used March 31, 2011 market rates on outstanding foreign currency denominated monetary assets and liabilities to perform the sensitivity analyses separately for each of our currency exposures. The estimates are based on the market risk sensitive portfolios described in the preceding paragraphs and assume instantaneous, parallel shifts in exchange rates. As of March 31, 2011, our working capital (defined as current assets less current liabilities) subject to foreign currency translation risk was $192.3 million. The potential decrease in net current assets from a hypothetical 10% adverse change in quoted foreign currency exchange rates would be $19.2 million.

Our cash and cash equivalents primarily consisted of highly-rated commercial paper and money market funds. We currently have no investments of any type and do not have any long-term borrowings. Our exposure to market risk for changes in interest rates is limited because nearly all of our cash and cash equivalents have a short-term maturity and are used primarily for working capital purposes.

We believe that our results of operations are not materially impacted by moderate changes in the inflation rate. Inflation and changing prices did not have a material effect on our business, financial condition or results of operations in 2008, 2009, 2010 or the first quarter of 2011.

The preparation of financial statements in conformity with generally accepted accounting principles of the United States, or U.S. GAAP, requires estimates and assumptions that affect the reported amounts and classifications of assets and liabilities, revenues and expenses, and the related disclosures of contingent liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of the company's financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the following critical accounting policies and estimates addressed below. We also have other key accounting policies, which involve the use of estimates, judgments, and assumptions that are significant to understanding our results. See Note 2 "Summary of Significant Accounting Policies" of Notes to Consolidated Financial Statements for further information. Although we believe that our estimates, assumptions, and judgments are reasonable, they are based upon information available at the time. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

We recognize revenue from the sale of Groupons when the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the selling price is fixed or determinable; and collectability is reasonably assured. These criteria generally are met when the number of customers who purchase the daily deal exceeds any predetermined minimum or threshold, based on the executed contract with our merchants. We record the gross purchase price we receive, excluding taxes where applicable, as we are the primary obligor in the transaction, and record an allowance for estimated customer refunds on total revenue primarily based on historical experience.

We use various customer loyalty and reward programs to build brand loyalty and provide subscribers with incentives to buy Groupons. When subscribers perform qualifying acts, such as providing a referral to a new subscriber or participating in promotional offers, we grant the customer credits that can be redeemed for awards such as free or discounted goods or services in the future. We accrue the costs related to the associated obligation to redeem the award credits granted at issuance in accrued expenses on the consolidated balance sheets and record the corresponding offset to revenue on the consolidated statements of operations.

If our judgments regarding estimated customer refunds and accrued costs associated with customer loyalty and reward programs are inaccurate, actual net revenue could differ from the amount we recognize, directly impacting our results of operations.

A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations using the purchase method of accounting and allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair value at the purchase date. The difference between the purchase price and the fair value of the net assets acquired is recorded as goodwill.

In determining the fair value of assets acquired and liabilities assumed in a business combination, we primarily use recognized valuation methods such as an income approach or a cost approach and apply present value modeling. Our significant estimates in the income or cost approach include identifying business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value. Further, we make certain assumptions within present value modeling valuation techniques including risk-adjusted discount rates, future price levels, rates of increase in operating expenses, weighted average cost of capital, rates of long-term growth,

and effective income tax rates. Valuations are performed by management or independent valuation specialists under management's supervision, where appropriate. We believe that the estimated fair value assigned to the assets acquired and liabilities assumed are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates.

Future changes in our assumptions or the interrelationship of those assumptions may negatively impact future valuations. In future measurements of fair value, adverse changes in discounted cash flow assumptions could result in an impairment of goodwill or intangible assets that would require a non-cash charge to the consolidated statements of operations and may have a material effect on our financial condition and operating results.

We measure stock-based compensation cost at fair value, net of estimated forfeitures, and generally recognize the corresponding compensation expense on a straight-line basis over the service period during which awards are expected to vest. We include stock-based compensation expense in selling, general and administrative expenses in our consolidated statements of operations. The fair value of restricted stock and restricted stock units is based on the valuation of our common stock on the date of grant. Determining the fair value of stock-based awards at the grant date requires judgment.

We use the Black-Scholes-Merton option-pricing model to determine the fair value of stock options. The determination of the grant date fair value of options using an option-pricing model is affected by our estimated common stock fair value as well as assumptions regarding a number of other complex and subjective variables. These variables include the fair value of our common stock, our expected stock price volatility over the expected term of the options, stock option exercise and cancellation behaviors, risk-free interest rates, and expected dividends, which are estimated as follows:

If any of the assumptions used in the Black-Scholes-Merton model changes significantly, stock-based compensation for future awards may differ materially compared with the awards granted previously.

The following table presents the weighted-average assumptions used to estimate the fair value of options granted during the years ended December 31, 2008, 2009 and 2010:

The fair value of the common stock underlying our stock options was determined by our board of directors, or the Board, which intended that all options granted were exercisable at a price per share not less than the per share fair value of our common stock underlying those options on the date of grant. The assumptions we use in the valuation model are based on future expectations combined with management judgment. In the absence of a public trading market, the Board with input from management exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of our common stock as of the date of each option grant, including the following factors:

We granted stock options with the following exercise price ranges each quarter since the beginning of 2008:

Three Months Ended

March 31, 2008	—	—
June 30, 2008	30,000	0.03
September 30, 2008	480,000	0.03
December 31, 2008	600,000	0.03
March 31, 2009	300,000	0.05
June 30, 2009	2,814,000	0.09
September 30, 2009	3,258,000	0.16
December 31, 2009	873,000	0.51
March 31, 2010	5,625,000	2.42
June 30, 2010	1,121,400	3.35
September 30, 2010	1,868,200	4.49
December 31, 2010	150,600	6.95
March 31, 2011	60,000	15.80

Summarized below are the significant factors the Board considered in determining the fair value of the common stock underlying our stock-based awards.

We raised $4.7 million in net proceeds from the issuance convertible preferred stock in January 2008 and began operations with the launch of our first market in Chicago in November 2008.

We are subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. For example, our effective tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than anticipated in countries where we have higher statutory rates, by changes in foreign currency exchange rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations.

We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income tax against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits and any related litigation could be materially different from historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on our operating results or cash flows in the period or periods for which that determination is made.

We account for income taxes using the liability method, under which deferred income tax assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying values of assets and liabilities and their respective tax bases. We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not

that the deferred tax assets will be realized. Any change in the valuation allowance would be charged to income in the period such determination was made.

In performing this review, we make estimates and assumptions regarding projected future taxable income, the expected timing of reversals of existing temporary differences and the implementation of tax planning strategies. A change in these assumptions could cause an increase or decrease to the valuation allowance resulting in an increase or decrease in the Company's effective tax rate, which could materially impact our results of operations.

In September 2006, the Financial Accounting Standards Board, or the FASB, issued accounting guidance, which, among other requirements, defines fair value, establishes a framework for measuring fair value, and expands disclosures about the use of fair value measurements. Such guidance prescribes a single definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For financial instruments and certain nonfinancial assets and liabilities that are recognized or disclosed at fair value on a recurring basis at least annually, the guidance was effective beginning the first fiscal year that begins after November 15, 2007. This portion of the guidance, which was adopted as of the beginning of 2008, had no impact on our consolidated financial statements. For all other nonfinancial assets and liabilities the guidance was effective for fiscal years beginning after November 15, 2008. We adopted this guidance effective as of the beginning of 2009, and its application had no impact on our consolidated financial statements. In January 2010, the FASB issued additional guidance that improves disclosures about fair value measures that were originally required. The new guidance is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of this guidance did not impact our financial position or results of operations.

In December 2007, the FASB issued guidance that establishes principles and requirements for determining how a company recognizes and measures the fair value of identifiable assets acquired, liabilities assumed, noncontrolling interests and certain contingent considerations acquired in a business combination. The guidance on business combinations also requires acquisition-related transaction expenses and restructuring costs be expensed as incurred rather than capitalized. This guidance became effective for fiscal years beginning after December 15, 2008 and we adopted the provisions of this guidance prospectively beginning in 2009. In December 2010, the FASB issued an update to this guidance, which specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period. The amendments also expand the supplemental pro forma disclosures that are required. The new guidance is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. We adopted the provisions of this business combinations guidance at the beginning of 2011.

In April 2008, the FASB issued a staff position that amends the list of factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets. This new guidance applies to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. Under this guidance, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. This staff position became effective for fiscal years beginning after December 15, 2008. We adopted the provisions of this guidance

prospectively beginning in 2009, and its application had no impact on our consolidated financial statements.

In June 2009, the FASB issued guidance that establishes the FASB Accounting Standards Codification as the sole source of authoritative U.S. GAAP. Pursuant to these provisions, we have incorporated the applicable references in its consolidated financial statements. The adoption of this guidance did not impact our financial position or results of operations.

In June 2009, the FASB issued guidance that eliminates the qualifying special purpose entity concept, changes the requirements for derecognizing financial assets and requires enhanced disclosures about transfers of financial assets. The guidance also revises earlier guidance for determining whether an entity is a variable interest entity, requires a new approach for determining who should consolidate a variable interest entity, changes when it is necessary to reassess who should consolidate a variable interest entity, and requires enhanced disclosures related to an enterprise's involvement in variable interest entities. The guidance is effective for the first annual reporting period that begins after November 15, 2009. We adopted the provisions of this guidance prospectively beginning in 2010, and its application had no impact on our consolidated financial statements.

In September 2009, the FASB issued guidance that allows companies to allocate arrangement consideration in a multiple element arrangement in a way that better reflects the transaction economics. It provides another alternative for establishing fair value for a deliverable when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined. When this evidence cannot be determined, companies will be required to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. The guidance also expands the disclosure requirements to require that an entity provide both qualitative and quantitative information about the significant judgments made in applying this guidance. This guidance was effective on a prospective basis for revenue arrangements entered into or materially modified on or after January 1, 2011. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In February 2010, the FASB issued guidance, effective immediately that removes the requirement to disclose the date through which subsequent events were evaluated in both originally issued and reissued financial statements for SEC filers. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In December 2010, the FASB issued guidance about when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. According to the new guidance, entities must consider whether it is more likely than not that goodwill impairment exists by assessing if there are any adverse qualitative factors indicating impairment. The qualitative factors are consistent with the existing guidance. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The adoption of this new guidance did not have a material impact on the consolidated financial statements.

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:

Groupon primarily addresses the worldwide local commerce markets in the leisure, recreation, foodservice and retail sectors. According to Euromonitor, the leisure, recreation and foodservice market is expected to be $1.4 trillion in the U.S. and $5.3 trillion internationally in 2011. The retail market is expected to be $2.9 trillion in the U.S. and $12.2 trillion internationally in 2011. We believe a substantial portion of these expenditures on leisure, recreation, foodservice and retail will be spent with local merchants. Groupon also addresses the online advertising market serving these merchants. The size of the U.S. online advertising market is estimated to be $51.9 billion in 2011, of which $16.1 billion is estimated to be spent by local merchants according to Borrell Associates. The size of the global online advertising market is estimated to be approximately $79 billion in 2011, according to IDC.

The following examples illustrate how our marketplace works and the benefits it can provide our merchants and consumers.

We have offered deals involving over 140 different types of businesses, services and activities that fall into the six broad categories identified below. The following chart shows the percentage of deals we offered worldwide across these categories during the first quarter of 2011:

We have created an e-commerce marketplace for connecting local merchants to consumers. Although there are many companies which have tried to replicate our approach, we believe that the customer experience and relevancy of our deals, our merchant scale and quality and our brand are sustainable competitive advantages.

Customer Experience and Relevance of Deals. We are committed to providing a great customer experience and maintaining the trust of our customers. Consistent with this commitment, our "Groupon Promise" is core to our customer service philosophy:

In addition, 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. We use information about our subscribers to select and send deals via email and our mobile applications can also target deals to subscribers based on proximity to the sponsoring merchant. Increased relevancy enables us to offer several daily deals, which we believe results in increasing purchases by targeted subscribers, thereby driving greater demand for Groupons. We monitor the relevancy of deals by measuring purchasing rates among targeted subscribers.

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 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 offering deals through our marketplace, creating a network effect.

Brand. We believe we have built a trusted and recognizable brand by delivering a compelling value proposition to merchants and consumers. A benefit of our 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 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. As of March 31, 2011, we had 83.1 million subscribers. We have made significant investments to acquire subscribers through online marketing initiatives, such as search engine marketing, display advertisements, referral programs and affiliate marketing. In 2010 and during the first quarter of 2011, we spent $241.5 million and $179.9 million, respectively, on these initiatives. In addition, our subscriber base has increased by word-of-mouth. We intend to continue to invest in acquiring subscribers so long as we believe the economics of our business support such investments. See "—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. We intend to continue to invest in the development of increased relevance of

our service as the number and variety of our deals we offer our subscribers increase and we gain more information about our subscribers' interests.

Grow the number of merchants we feature. During 2010 and the first quarter of 2011, we featured Groupon daily deals for over 66,000 merchants and over 56,000 merchants worldwide, respectively. To drive merchant growth, we have expanded the number of ways in which consumers can discover deals through our marketplace. 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. For example, we recently began offering a mobile redemption application that enables our merchants to manage their Groupon business and maintain an ongoing relationship with their Groupon customers.

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. For example, to better target subscribers, in February 2011, we launched Deal Channels, which aggregates daily deals from the same category. We currently offer Deal Channels in home and garden and event tickets and travel. In addition, we recently have launched Groupon NOW, which is a deal initiated by a merchant on demand and offered instantly to subscribers through mobile devices and our website. 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. Our largest transaction to date was our acquisition of CityDeal, a company based in Europe that operated in 80 markets in 16 countries with 1.9 million subscribers at the time of acquisition. Excluding CityDeal, each of the companies we have acquired had less than $1 million in annual revenue at the time of acquisition. Typically, the core assets that we gain from an acquisition are a local management team and small subscriber and merchant bases, to which we then apply our expertise, resources and brand to scale the business. In addition to acquisitions, we have entered into agreements with local partners to expand our international presence. For example, in February 2011, we entered into a partnership with TCH Burgundy Limited, or Tencent, a Chinese internet company, to operate a Chinese e-commerce website. 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 acquisitions and business development partnerships.

We have grown our subscriber base from 0.2 million as of June 30, 2009 to 83.1 million subscribers worldwide as of March 31, 2011. The chart below shows the number of our subscribers as of the end of each quarter since June 30, 2009:

We grow our subscriber base through marketing initiatives and word-of-mouth. Online marketing consists of search engine marketing, display advertisements, referral programs and affiliate marketing and has historically represented our largest operating expense. Our offline marketing programs include traditional television, billboard, and radio advertisements, public relations as well as sponsored events to increase our visibility and build our brand.

In 2010 and the first quarter of 2011, we spent $241.5 million and $179.9 million, respectively, on subscriber acquisition. We acquired 48.8 million and 32.5 million subscribers, respectively, during those periods. Since our inception, we have prioritized growth, and investments in our marketing initiatives have contributed to our losses. Our investments in subscriber growth are driven by the cost to acquire a subscriber as compared to the profits we expect to generate from that subscriber over time. Once acquired, subscribers have been relatively inexpensive to maintain because our interaction is largely limited to daily emails and our mobile applications. Over time, as our business continues to scale and we become more established in a greater percentage of our markets, we expect that our marketing expense will decrease as a percentage of revenue.

To demonstrate the economics of our business model, we have compared the revenue and gross profit generated from the North American subscribers we acquired in the second quarter of 2010, which we refer to as our Q2 2010 cohort, to the online marketing expenses incurred to acquire such subscribers. The Q2 2010 cohort is illustrative of trends we have seen among our North American subscriber base. The Q2 2010 cohort included 3.7 million subscribers that we initially spent $18.0 million in online marketing to acquire in the second quarter of 2010. In that quarter, we generated $29.8 million in revenue and $12.8 million in gross profit from the sale of approximately 1.2 million Groupons to these subscribers. Through March 31, 2011, we generated an aggregate of $145.3 million in revenue and $61.7 million in gross profit from the sale of approximately 6.3 million Groupons to the Q2 2010 cohort. In summary, we spent $18.0 million in online marketing expense to acquire subscribers in the Q2 2010 cohort and generated $61.7 million in gross profit from this group of subscribers over four quarters.

To further illustrate our business model, we have provided case studies for Chicago, the site of our North American headquarters and our oldest North American market, Boston, our second oldest North American market, Berlin, the site of our international headquarters, and London, both international

markets we entered through the CityDeal acquisition. The performance of these markets is not necessarily indicative of our current or future performance in other markets.

Chicago is the first market we entered, and we offered our first daily deal there in November 2008. Chicago is also our largest market. Due to our history in Chicago and the fact that we are headquartered there, we have tested new features and strategies in Chicago. As of June 30, 2009, we had 36,891 subscribers, and, for the second quarter of 2009, we generated $1.6 million in revenue from 46,909 Groupons sold. As of March 31, 2011, we had 1.5 million subscribers, and, for the first quarter of 2011, we generated $21.5 million in revenue from 950,689 Groupons sold. The following table shows subscribers and cumulative customers as of the end of each quarter and featured merchants, revenue and Groupons sold in each quarter beginning with the second quarter of 2009:

Boston is the second market we entered, and we offered our first daily deal there in April 2009. As of June 30, 2009, we had 17,069 subscribers, and, for the second quarter of 2009, we generated $0.7 million in revenue from 26,032 Groupons sold. As of March 31, 2011, we had 778,936 subscribers, and, for the first quarter of 2011, we generated $9.3 million in revenue from 388,178 Groupons sold. The following table shows subscribers and cumulative customers as of the end of each quarter and featured merchants, revenue and Groupons sold in each quarter beginning with the second quarter of 2009:

Berlin was one of the international markets we entered through our acquisition of CityDeal which was completed in May 2010 and is the site of our European headquarters. As of June 30, 2010, we had 92,500 subscribers and, for the second quarter of 2010, we generated $1.0 million in revenue from 47,068 Groupons sold. As of March 31, 2011, we had 396,000 subscribers, and, for the first quarter of 2011 we generated $6.1 million in revenue from 229,279 Groupons sold. The following table shows subscribers and cumulative customers as of the end of each quarter and featured merchants, revenue and Groupons sold in each quarter beginning with the second quarter of 2010:

London also was one of the international markets we entered through our acquisition of CityDeal. As of June 30, 2010, we had 159,156 subscribers, and for the second quarter of 2010, we generated $1.7 million in revenue from 49,564 Groupons sold. As of March 31, 2011, we had 1,602,968 subscribers, and, for the first quarter of 2011 we generated $20.1 million in revenue from 402,086 Groupons sold. The following table shows subscribers and cumulative customers as of the end of each quarter and featured merchants, revenue and Groupons sold in each quarter beginning with the second quarter of 2010:

In the first quarter of 2011, we featured deals from over 56,000 merchants worldwide. To drive merchant growth, we have expanded the number and variety of product offerings available through our marketplace and invested in our salesforce. The charts below show the number of merchants we featured in our North America segment and our International segment, which we entered in May 2010 with the acquisition of CityDeal, during each quarter indicated:

Our salesforce includes over 3,500 inside and outside merchant sales representatives who build merchant relationships and provide local expertise. Our North American merchant sales representatives are based in our offices in Chicago and our international merchant sales representatives work from our 74 international offices. As the size of our salesforce has grown, the productivity of our sales representatives has increased. In the first quarter of 2009, when we first began investing in the development of our salesforce, the average number of merchants featured per sales representative per month was six and the average revenue per sales representative per month was $87,000. In the first quarter of 2011, the average number of merchants featured per sales representative per month was 17 and the average revenue per sales representative per month was $172,000. The following table lists the number of sales representatives in our North American and International segments as of the end of each quarter beginning with the first quarter of 2009:

The number of sales representatives is higher as a percentage of revenue in our International segment due to the need to have separate sales organizations for most of the different countries in which we operate. Due to local economic conditions, however, the average cost of each sales representative is lower in most countries in our International segment as compared to the costs in our North American segment.

Our standard contractual arrangements grant us the exclusive right to feature deals for a merchant's products and services for a limited time period and provide us with the discretion as to whether or not to offer the deal during such period. Our merchant pool represents the number of committed deals that we have discretion to run at any time. Our merchant pool has grown from 15 as of March 31, 2009 to over 40,000 as of March 31, 2011. We restrict the size of our merchant pool to manage the length of time between contract signing to deal launch, but have expanded the pool each quarter as we have increased our capacity to offer more deals each day. The scale of our merchant pool benefits our marketplace by enabling us to offer a wider variety of more relevant deals.

The charts below show the size of our merchant pool for our North America segment and our International segment, which we entered in May 2010 with the acquisition of CityDeal, as of the end of each quarter indicated:

As our operations have grown, we have increased the number and variety of products that we offer. Our new products have allowed us to serve more merchants each day by segmenting our subscriber base, offering more relevant, targeted deals and increasing the rate at which deals are purchased within each segment. We employ an algorithmic approach to deal targeting based on data collected by us about our subscribers, merchants and deals. We launched our first targeted deals in June 2010 in our largest North American markets. The combination of our North American salesforce of 661 as of March 31, 2011, our technology platform and our merchant pool of over 20,000 merchants as of March 31, 2011 gives us the ability to target deals to subsets of North American subscribers within a particular market. In addition, instead of featuring one deal per city per day, we can feature multiple deals per city per day matched to different groups of subscribers based on what we know about their personal preferences. We intend to continue to build our international infrastructure to enable us to offer targeted deals worldwide, as targeting increases the number of deals that we can offer across our marketplace.

Featured Daily Deals. We distribute a featured daily deal by email on behalf of local merchants to subscribers using our targeting technology, which distributes deals to subscribers based on their location and personal preferences. We also have offered daily deals from more than 40 national merchants, including Bath & Body Works, The Body Shop, Hyatt Regency, InterContinental Hotels, Lions Gate, Redbox, Shutterfly and Zipcar across subsets of the North American market. We initially offered one daily deal to all subscribers in a given market but now offer several daily deals in most established markets. We launched this product in November 2008 and it is offered in all of our North American and international markets.

Deals Nearby. Daily deals that do not appear as a featured daily deal appear as Deals Nearby. Each Deal Nearby currently is summarized in fewer than 20 words next to the featured daily deal. Deals Nearby often extend beyond the subscriber's closest market or buying preferences. Deals Nearby can also be targeted to certain subscribers, where access to the deal can only be obtained through an emailed hyperlink. Upon clicking the hyperlink, a subscriber is directed to a full description of the deal that is presented in the same format as the subscriber's featured daily deal. We launched this product in January 2009 and it is offered in substantially all of our North American and international markets.

The following graphic captures the featured daily deal and all Deals Nearby offered in Washington, DC on March 24, 2011:

National Deals. National merchants also have used our marketplace as an alternative to traditional marketing and brand advertising. Although our primary focus continues to be on local deals, we use

national deals from time to time to build our brand awareness, acquire new customers and generate additional revenue. As an example, on August 19, 2010, we emailed and posted a Groupon daily deal offering $50 of apparel at Gap for $25 to 9.2 million subscribers across 85 markets in North America. We sold approximately 433,000 Groupons in 24 hours, generating over $10.8 million in revenue. Of the consumers who purchased Groupons, approximately 200,000 were new subscribers. The Gap deal was our first deal from a national brand that we distributed across our North American markets. Since the Gap deal, we have featured deals from Barnes & Noble, FTD and Nordstrom across our North American markets.

Groupon NOW. Groupon NOW is a deal initiated by a merchant on demand and offered instantly to subscribers through mobile devices and our website. Groupon NOW deals target subscribers within close proximity of the merchant and the purchased Groupons typically expire within a few hours of the deal launch. Merchants launch Groupon NOW deals from our platform and can use this product to attract customers when they have excess capacity. We launched Groupon NOW in the second quarter of 2011 in selected North American markets.

Deal Channels. Deal Channels aggregate daily deals from the same category and are accessible through our website and through email alerts that subscribers sign up to receive. We currently offer Deal Channels in home and garden and event tickets and travel. Merchants can register their deals to be included in a Deal Channel. Subscribers can use Deal Channels to focus on deals that are of interest to them. We launched Deal Channels in February 2011 in selected North American markets.

Self-Service Deals. Self-Service Deals allows our merchants to use a self-service platform to create and launch deals at their discretion. The use of the platform is free and allows merchants to establish a permanent e-commerce presence on Groupon that can be visited and followed by subscribers. We receive a portion of the purchase price from deals sold through Self-Service Deals based on the extent to which we marketed the deal. We launched Self-Service Deals in December 2010 in selected North American markets.

We distribute our deals directly through several platforms: a daily email, our websites, our mobile applications and social networks. We also utilize various online affiliates to display and promote Groupon deals on their websites, as well as agreements with several large online brands to distribute our deals. Our large online affiliates include eBay, Microsoft, Yahoo and Zynga. Other partnerships allow us to distribute daily deals to a partner's user base. For example, in December 2010, we partnered with Redbox to offer a daily deal to their user base and we acquired over 200,000 new customers through that offer and in March 2011, we partnered with eBay to offer a daily deal to their user base and we acquired over 290,000 new customers through that offer.

In addition, we have partnered with thousands of smaller online affiliates. Affiliates can embed our widget onto their website and earn a commission when their website visitors purchase Groupons through the affiliate link. Our commission rate varies depending on whether the customer is new or existing and the website's overall sales volume. We also offer commissions to affiliates when they refer a customer to Groupon. We expect to continue to pursue relationships to extend the distribution of our deals.

We also use various customer loyalty and reward programs to build brand loyalty and provide customers with incentives to buy Groupons. When customers perform qualifying acts, such as providing a referral to a new subscriber or participating in promotional offers, we grant the customer credits that can be redeemed for awards such as free or discounted goods or services in the future.

Email. The featured daily deal email contains one headline deal with a full description of the deal and often contains links to "More Great Deals Nearby," all of which are available within a subscriber's market. A subscriber who clicks on a deal within the daily email is directed to our website to learn more

about the deal and to purchase the Groupon. We sometimes email "WOW" deals to targeted subscribers as they are available, which are deals that have performed well in the past and can be offered on behalf of the merchant on demand.

Websites. Visitors are prompted to register as a subscriber when they first visit our website and thereafter use the website as a portal for featured daily deals, Deals Nearby, national deals, and where available, Deal Channels and Self-Service Deals. Our website also provides opportunities to engage with the Groupon community through the GrouBLOGpon, a blog maintained by our employees, Groupon Meetups, a forum for meeting with others to redeem Groupons at a particular location, Groupon Flickr, a collection of digital photos from subscribers, and rewards programs for referring new subscribers, such as our offer of $10 in Groupon Bucks to subscribers who refer someone who later buys a Groupon.

Mobile Applications. Consumers also access our deals through our mobile applications, which are available on the iPhone, Android, Blackberry and Windows mobile operating systems. We launched our first mobile application in March 2010 and our applications have been downloaded 8.8 million times since then. These applications enable consumers to browse, purchase, manage and redeem deals on their mobile devices as well as access Groupon NOW deals that are offered based on the location of the subscriber.

Social Networks. We publish our daily deals through various social networks and our notifications are adapted to the particular format of each of these social networking platforms. Our website and mobile application interfaces enable our consumers to push notifications of our deals to their personal social networks.

Our business operations are divided into the following core functions to address the needs of our merchants and customers.

City Planners. Our city planners identify merchant leads and manage deal scheduling to maximize deal quality and variety within our markets. In identifying leads, city planners rank local merchants based on reviews, local feedback and other data. In certain cases, city planners submit requests to merchant services representatives for certain deals based on a scoring system that considers past performance of similar deals, quality of merchant reviews, number of redemption locations and the zip code of the merchant. In scheduling deals, city planners review deals in our merchant pool and determine which deals to offer based on the viability of the deal as well as gross profit and marketing goals. City planners also work with our salesforce to establish sales quotas based on subcategory-level performance in a particular city, such as addressable market size and scheduling diversity. As of March 31, 2011, we employed 410 city planners.

Editorial. Our editorial department is responsible for creating editorial content on the daily deals we offer, as well as additional content featured on our website. Each deal that we feature typically goes through several stages to ensure that the deal description meets our standards for accuracy, quality and editorial voice. After offer details are reviewed, our editorial staff verifies the accuracy of the deal and its value through independent research. Once a deal is vetted, our editorial staff drafts a full description of the deal, which is passed through voice editing and copy editing before being launched. As of March 31, 2011, we employed 925 editorial staff.

Merchant Services. Once a contract is signed, one of our merchant services representatives initiates the first of several communications with the merchant to introduce the merchant to the tools that we provide and plan for Groupon redemptions through expiration. Typically, a merchant services representative communicates with merchants before, during, and after a daily deal is featured. Before the deal is run, the representative works with the merchant to prepare staffing and inventory capacity in anticipation of increased customer traffic. The representative communicates with the merchant on the day the deal is featured to review deal performance. After the deal has closed, the representative maintains contact with the merchant to support the merchant's redemption efforts and to prepare the merchant for a potential spike in redemption near expiration. We also offer several merchant tools to help merchants manage their deals. These tools include status updates on deal performance, analytics that measure purchase traffic and demographic information of purchasers, a capacity calculator to estimate demand for the deal ahead of its feature date, and a return on investment calculator that estimates the return on investment that the merchant may receive from the deal. Each of these tools is accessible through an online account that is personal to the merchant and accessed through our website. As of March 31, 2011, we employed 277 merchant services representatives.

Customer Service Representatives. Our customer service representatives can be reached via phone or email 24 hours a day, seven days a week. Our Groupon Promise is core to our customer service philosophy. The customer service team also works with our information technology team to improve the customer experience on the website and mobile applications based on customer feedback. As of March 31, 2011, we employed 825 customer representatives.

Technology. We employ technology to improve the experience we offer to subscribers and merchants, increase the rate at which our subscribers purchase Groupons, and enhance the efficiency of our business operations. A component of our strategy is to continue developing and refining our technology.

We currently use a common technology platform across our North American operations that includes business operations tools to track internal workflow, applications and infrastructure to serve content at scale, dashboards and reporting tools to display operating and financial metrics for historical and ongoing deals, and a publishing and purchasing system for consumers. Over time, we plan to merge our North American technology platform with our international technology platforms and we expect this to enable greater efficiencies and consistency across our global organization.

Our websites are hosted at U.S. datacenters in Miami, Florida and Dallas, Texas and international datacenters in Asia and Europe. Our data centers host our public-facing websites and applications, as well as our back-end business intelligence systems. We use commercial antivirus, firewall and patch-management technologies to protect and maintain the systems located at our data centers. We have invested in intrusion detection and pattern detection tools to try to recognize intrusions to our website. We have also engaged a third-party internet security provider to test the security of our website and identify vulnerabilities. In financial transactions between our website and our customers, we use Secure Socket Layer to provide encryption in transferring data. We have designed our websites to be available, secure and cost-effective using a variety of proprietary software and freely available and commercially supported tools. We believe we can scale to accommodate increasing numbers of subscribers by adding relatively inexpensive industry-standard hardware or using a third-party provider of computing resources.

We devote a substantial portion of our resources to developing new technologies and features and improving our core technologies. Our information technology team is focused on the design and development of new features and products, maintenance of our websites and development and maintenance of our internal operations systems. As of March 31, 2011, our information technology team consisted of 253 employees.

Since our inception, a substantial number of competing group buying sites have emerged around the world attempting to replicate our business model. These competitors offer substantially the same or similar product offerings as us. We also compete with businesses that focus on particular merchant categories or markets. We increasingly compete against other large internet and technology-based businesses, such as Facebook, Google and Microsoft, each of which have launched initiatives which are competitive to our business. We also compete with traditional offline coupon and discount services, as well as newspapers, magazines and other traditional media companies that provide coupons and discounts on products and services. We believe the principal competitive factors in our market include the following:

We believe we compete favorably on the factors described above. However, we anticipate that larger, more established companies may directly compete with us as we continue to demonstrate the viability of a local e-commerce business model. Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources and larger customer bases than we do. These factors may allow our competitors to benefit from their existing customer or subscriber base with lower acquisition costs or to respond more quickly than we can to new or emerging technologies and changes in customer requirements. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies, which may allow them to build a larger subscriber base or to monetize that subscriber base more effectively than us. Our competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services.

We are subject to a number of foreign and domestic laws and regulations that affect companies conducting business on the internet, many of which are still evolving and could be interpreted in ways that could harm our business. In the United States and abroad, laws relating to the liability of providers of online services for activities of their users and other third parties are currently being tested by a number of claims. These regulations and laws may involve taxation, tariffs, subscriber privacy, data protection, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales and other taxes, libel and personal privacy apply to the internet as the vast majority of these laws were adopted prior to the advent of the internet and do not contemplate or address the unique issues raised by the internet or e-commerce. In addition, it is possible that governments of one or more countries may seek to censor content available on our websites or may even attempt to completely block access to our websites. Accordingly, adverse legal or regulatory developments could substantially harm our business.

Groupons may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD Act and state laws governing gift cards, stored value cards and coupons. Many of these laws contain provisions governing the use of gift cards, gift certificates, stored value cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees. If Groupons are subject to the

CARD Act, the value of the Groupon must not expire before the later of (i) five years after the date on which the Groupon was issued or the date on which the customer last loaded funds on the Groupon if the Groupon has a reloadable feature; and (ii) the Groupon's expiration date (if any). We are currently subject to several purported class actions claiming that Groupons are subject to the CARD Act.

In addition, certain states and foreign jurisdictions have requirements for disclosure and product terms and conditions, including expiration dates and permissible fees, that might apply to a Groupon. Some states and foreign jurisdictions also include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period of time (generally between one and five years) and impose certain reporting and recordkeeping obligations. We do not remit any amounts relating to unredeemed Groupons based upon our assessment of applicable laws. The analysis of the potential application of the unclaimed and abandoned property laws to Groupons is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with customers and merchants and our role as it relates to the issuance and delivery of a Groupon. We are currently subject to several actions claiming that Groupons are subject to various unclaimed and abandoned property laws.

Many states have passed laws requiring notification to subscribers when there is a security breach of personal data. There are also a number of legislative proposals pending before the U.S. Congress, various state legislative bodies and foreign governments concerning data protection. In addition, data protection laws in Europe and other jurisdictions outside the United States may be more restrictive, and the interpretation and application of these laws are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change our data practices, which could have an adverse effect on our business. Furthermore, the Digital Millennium Copyright Act has provisions that limit, but do not necessarily eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. Complying with these various laws could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services. For these purposes, financial institutions are broadly defined to include money services businesses such as money transmitters, check cashers and sellers or issuers of stored value. Examples of anti-money laundering requirements imposed on financial institutions include customer identification and verification programs, record retention policies and procedures and transaction reporting. We do not believe that we are a financial institution subject to these laws and regulations based, in part, on the characteristics of the Groupons and our role with respect to the distribution of the Groupons to customers. However, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department tasked with implementing the requirements of the Bank Secrecy Act, recently proposed amendments to the scope and requirements for parties involved in stored value or prepaid access, including a proposed expansion of the definition of financial institution to include sellers or issuers of prepaid access. In the event that this proposal is adopted as proposed, it is possible that a Groupon could be considered a financial product and that we could be a financial institution.

We are or may be subject to similar laws and regulations in jurisdictions outside of the United States.

We protect our intellectual property rights by relying on federal, state and common law rights, as well as contractual restrictions. We control access to our proprietary technology by entering into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties.

In addition to these contractual arrangements, we also rely on a combination of trade secrets, copyrights, trademarks, service marks, trade dress, domain names and patents to protect our intellectual property. We pursue the registration of our copyrights, trademarks, service marks and domain names in the United States and in certain locations outside the United States. Our trademarks in the United States or other countries include Groupon®, Groupon NOW, CityDeal, Grouspawn and the Groupon logo, as well as others, and as of May 5, 2011, we owned one patent and had five patent applications pending.

Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual property protection may not be available in the United States or other countries in which we operate. Also, the efforts we have taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time-consuming. Any unauthorized disclosure or use of our intellectual property could make it more expensive to do business and harm our operating results.

Companies in the internet, social media technology and other industries may own large numbers of patents, copyrights and trademarks and may frequently request license agreements, threaten litigation or file suit against us based on allegations of infringement or other violations of intellectual property rights. We are currently subject to, and expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors and non-practicing entities. As we face increasing competition and as our business grows, we will likely face more claims of infringement.

As of March 31, 2011, we had 1,724 employees in our North America segment, consisting of 811 corporate and operational staff, 661 sales representatives and 252 customer service representatives, and 5,383 employees in our International segment, consisting of consisting of 1,915 corporate and operational staff, 2,895 sales representatives and 573 customer service representatives.

Our principal executive offices in North America are located in Chicago, Illinois and our principal international executive offices are located in Berlin, Germany. As of March 31, 2011, the properties listed below represented our materially important facilities, both of which are leased. We believe that our properties are generally suitable to meet our needs for the foreseeable future. However, we will continue to seek additional space as needed to satisfy our growth.

We currently are involved in several disputes or regulatory inquiries, including suits by our customers (individually or as class actions) alleging, among other things, violation of the CARD Act and state laws governing gift cards, stored value cards and coupons, violations of unclaimed and abandoned property laws and violations of privacy laws. The number of these disputes and inquiries is increasing. Any claims or regulatory actions against us, whether meritorious or not, could be time consuming, result in costly litigation, damage awards, injunctive relief or increased costs of doing business through adverse judgment or settlement, require us to change our business practices in expensive ways, require significant amounts of management time, result in the diversion of significant operational resources or otherwise harm our business.

In addition, third parties have from time to time claimed, and others may claim in the future, that we have infringed their intellectual property rights. We are subject to intellectual property disputes, and expect that we will increasingly be subject to intellectual property infringement claims as our services expand in scope and complexity. We have in the past been forced to litigate such claims. We may also become more vulnerable to third-party claims as laws such as the Digital Millennium Copyright Act are interpreted by the courts, and as we become subject to laws in jurisdictions where the underlying laws with respect to the potential liability of online intermediaries like ourselves are either unclear or less favorable. We believe that additional lawsuits alleging that we have violated patent, copyright or trademark laws will be filed against us. Intellectual property claims, whether meritorious or not, are time consuming and costly to resolve, could require expensive changes in our methods of doing business, or could require us to enter into costly royalty or licensing agreements.

From time to time, we may become party to additional litigation incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

The following table sets forth information about our executive officers and directors as of June 2, 2011:

Name		Age	Position

*Executive Officers:*
	Andrew D. Mason	30	Co-Founder, Chief Executive Officer and Director
	Jason E. Child	42	Chief Financial Officer
	Margaret H. Georgiadis	47	Chief Operating Officer
	Brian K. Totty	44	Senior Vice President—Engineering and Operations
*Directors:*
	Eric P. Lefkofsky	42	Co-Founder and Executive Chairman of the Board
	Peter J. Barris⁽²⁾⁽³⁾	59	Director
	Kevin J. Efrusy⁽¹⁾⁽²⁾	39	Director
	Bradley A. Keywell⁽²⁾⁽³⁾	41	Co-Founder and Director
	Theodore J. Leonsis^(1)(2)(3)	55	Vice Chairman of the Board
	Howard Schultz⁽¹⁾	57	Director

Andrew D. Mason is a co-founder of the Company and has served as our Chief Executive Officer and a director since our inception. In 2007, Mr. Mason co-founded ThePoint, a web platform that enables users to promote collective action to support social, educational and civic causes, from which Groupon evolved. Prior to co-founding ThePoint, Mr. Mason worked as a computer programmer with Innerworkings, Inc. (NASDAQ:INWK). Mr. Mason received his Bachelor of Arts from Northwestern University. Mr. Mason brings to our Board the perspective and experience as one of our founders and as Chief Executive Officer. Mr. Mason was elected to the Board pursuant to voting rights granted to holders of our common stock and preferred stock under our voting agreement, which will be terminated upon the closing of this offering.

Jason E. Child has served as our Chief Financial Officer since December 2010. From March 1999 through December 2010, Mr. Child held several positions with Amazon.com, Inc. (NASDAQ: AMZN), including Vice President of Finance, International from April 2007 to December 2010, Vice President of Finance, Asia from July 2006 to July 2007, Director of Finance, Amazon Germany, from April 2004 to July 2006, Director of Investor Relations from April 2003 to April 2004, Director of Finance, Worldwide Application Software from November 2001 to April 2003, Director of Finance, Marketing and Business Development from November 2000 to November 2001 and Global Controller from October 1999 to November 2000. Prior to joining Amazon.com, Mr. Child spent more than seven years at Arthur Andersen where he was a C.P.A. and a consulting manager. Mr. Child received his Bachelor of Arts from the Foster School of Business at the University of Washington.

Margaret H. Georgiadis has served as our Chief Operating Officer since May 2011. From October 2009 through April 2011, Ms. Georgiadis served as Vice President, Global Sales Operations at Google, Inc. (NASDAQ: GOOG), where she managed sales operations across regions and channels and the global technology teams that commercialize Google's products. She also led the local and commerce businesses. From January 2009 to September 2009, she served as a Principal at Synetro Capital, a private equity group in Chicago, Illinois. From August 2004 to December 2008, Ms. Georgiadis was Executive Vice President of

Card Products and Chief Marketing Officer at Discover Financial Services in Riverwoods, Illinois. From 1990 to 2004, she was a partner at McKinsey and Company in London and Chicago. Ms. Georgiadis has served on the board of directors of The Jones Group Inc. (NYSE: JNY) since January 2009. Ms. Georgiadis received her AB in Economics from Harvard and her Master of Business Administration from Harvard Business School.

Brian K. Totty, Ph.D., has served as our Senior Vice President of Engineering since November 2010. Dr. Totty was the Chief Executive Officer of Ludic Labs, Inc., a startup venture developing a new class of software applications from January 2006 through November 2007. We acquired Ludic Labs in November 2010. Dr. Totty also was a co-founder and Senior Vice President of Research and Development of Inktomi Corporation from February 2006 to August 2007. Dr. Totty received his Ph.D. in computer science from the University of Illinois at Urbana-Champaign, his Master of Public Administration from Harvard's Kennedy School and his Bachelor of Science from the Massachusetts Institute of Technology.

Eric P. Lefkofsky is a co-founder of the Company and has served as our Executive Chairman since our inception. Mr. Lefkofsky was elected to the Board pursuant to voting rights granted to the former holders of our Series B Preferred Stock under our voting agreement, which will be terminated upon the closing of this offering. Mr. Lefkofsky is a co-founder of Echo Global Logistics, Inc. (NASDAQ: ECHO) and has served on its board of directors since February 2005. Mr. Lefkofsky is the co-founder of InnerWorkings, Inc. (NASDAQ: INWK) and has served on its board of directors since August 2008. In 2008, Mr. Lefkofsky co-founded Lightbank LLC, a private investment firm specializing in information technology companies, and has served as a manager since that time. In April 2006, Mr. Lefkofsky co-founded MediaBank, LLC, an electronic exchange and database that automates the procurement and administration of advertising media, and has served as a director or manager since that time. From May 2000 to April 2001, Mr. Lefkofsky served as Chief Operating Officer and director of HA-LO Industries Inc. Mr. Lefkofsky co-founded Starbelly.com, Inc., and served as its President from September 1999 to May 2000, at which point Starbelly.com was acquired by HA-LO. In July 2001, HA-LO filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Mr. Lefkofsky also serves on the board of directors of Children's Memorial Hospital, the board of trustees of the Steppenwolf Theatre, the board of trustees of the Art Institute of Chicago and the board of trustees of the Museum of Contemporary Art in Chicago. Mr. Lefkofsky holds a bachelor's degree from the University of Michigan and a Juris Doctor degree from the University of Michigan Law School. Mr. Lefkofsky brings to the Board an in-depth knowledge and understanding of the Company's business as one of its founders as well as experience as the director of several public companies.

Peter J. Barris has served on our Board since January 2008. Mr. Barris was elected pursuant to voting rights granted to New Enterprise Associates under our voting agreement, which will be terminated upon the closing of this offering. Since July 2009, Mr. Barris has served on the board of directors of Echo Global Logistics, Inc. (NASDAQ: ECHO) and since January 2006, Mr. Barris has served on the board of directors of InnerWorkings, Inc. (NASDAQ: INWK). Since 1999, Mr. Barris has been the Managing General Partner of New Enterprise Associates where he specializes in information technology investing. Mr. Barris also serves on the board of directors of Vonage Holdings Corp. (NASDAQ: VG) and Neutral Tandem, Inc. (NASDAQ: TNDM). Mr. Barris is a member of the board of trustees, Northwestern University and board of advisors, Tuck's Center for Private Equity and Entrepreneurship at Dartmouth. He received a Master of Business Administration from Dartmouth College and a Bachelor of Science in Electrical Engineering from Northwestern University. Mr. Barris brings to the Board a sophisticated knowledge of information technology companies that includes investments in over twenty information technology companies that have completed public offerings or successful mergers as well as experience serving as a director of several public companies.

Kevin J. Efrusy has served on our Board since November 2009. Mr. Efrusy was elected pursuant to voting rights granted to Accel Growth Fund L.P. under our voting agreement, which will be terminated upon the closing of the offering. Mr. Efrusy joined Accel in 2003 where serves as a General Partner. From 1999 to 2002 he co-founded and served as President and VP of Business Development of IronPlanet, an online marketplace for heavy equipment. In 1998 he was a co-founder of Corio, an ASP/SaaS pioneer that went public on NASDAQ and was acquired by IBM in 2005. Mr. Efrusy was a product manager at Zip2 from 1996 to 1997 and an Associate Consultant at Bain & Company from 1995 to 1996. Mr. Efrusy also serves on the boards of directors of several private consumer internet service and SaaS/open source software companies. He formerly served on the boards of Xensource (acquired by Citrix in 2007), Springsource (acquired by VMWare in 2009), and BBN Technologies (acquired by Raytheon in 2009). Mr. Efrusy received his Master of Business Administration from the Sta


Delaware	7379	27-0903295
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)
600 West Chicago Avenue, Suite 620 Chicago, Illinois 60654 312-676-5773 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)


Large accelerated filer o		Accelerated filer o
Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price⁽¹⁾⁽²⁾	Amount of Registration Fee




Class A Common Stock, $0.0001 par value	$750,000,000	$87,075

	Price to Public	Underwriting Discounts and Commissions	Proceeds to Company	Proceeds to Selling Stockholders

Per Share	$	$	$	$
Total	$	$	$	$


Assumed initial public offering price per share of Class A common stock			$
	Pro forma net tangible book value per share as of March 31, 2011	$
	Increase per share attributable to this offering	$
Pro forma net tangible book value per share, as adjusted to give effect to this offering			$

Dilution per share to new investors			$


Steven J. Gavin, Esq. Matthew F. Bergmann, Esq. Winston & Strawn LLP 35 West Wacker Drive Chicago, Illinois 60601 312-558-5600		Peter M. Astiz, Esq. Gregory M. Gallo, Esq. Jason C. Harmon, Esq. DLA Piper LLP (US) 2000 University Avenue East Palo Alto, California 94303 650-833-2036

	Shares Purchased				Total Consideration

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent			Average Price Per Share
Existing stockholders				%	$			%	$
New public investors

Total			100.0	%	$		100.0	%

		Three Months Ended March 31,

		2010		% of total			2011		% of total
		(dollars in thousands)
North America		$	44,236		100.0	%	$	297,897		46.2	%
International			—		—			346,831		53.8	%

	Revenue	$	44,236		100.0	%	$	644,728		100.0	%

	Payment due by period

	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
	(in thousands)
Operating lease obligations⁽¹⁾	$	40,375	$	12,667	$	17,068	$	7,010	$	3,630
Purchase obligations⁽²⁾		907		680		227		—		—

Total	$	41,282	$	13,347	$	17,295	$	7,010	$	3,630



Dividend yield	—		—		—
Risk-free interest rate	3.10	%	2.82	%	2.58	%
Expected term (in years)	5.98		6.84		6.13
Expected volatility	46	%	46	%	46	%

	Three Months Ended,

Chicago	Jun. 30, 2009		Sept. 30, 2009		Dec. 31, 2009		Mar. 31, 2010		Jun. 30, 2010		Sept. 30, 2010		Dec. 31, 2010		Mar. 31, 2011
Subscribers		36,891		62,038		147,882		268,056		492,826		750,118,		1,102,146		1,504,978
Cumulative customers		19,003		43,023		74,237		125,403		184,074		285,987		409,746		552,712
Featured merchants		67		92		131		144		157		233		470		759
Revenue (in millions)	$	1.6	$	3.0	$	3.9	$	6.3	$	9.3	$	13.1	$	16.9	$	21.5
Groupons sold		46,909		84,373		149,371		263,304		350,928		541,084		678,933		950,689

	Three Months Ended,

Boston	Jun. 30, 2009		Sept. 30, 2009		Dec. 31, 2009		Mar. 31, 2010		Jun. 30, 2010		Sept. 30, 2010		Dec. 31, 2010		Mar. 31, 2011
Subscribers		17,069		56,904		122,375		194,615		285,615		412,467		561,064		778,936
Cumulative customers		8,545		20,953		36,634		62,610		94,617		142,930		197,961		272,548
Featured merchants		66		75		87		110		116		145		286		456
Revenue (in millions)	$	0.7	$	1.4	$	1.8	$	2.9	$	4.6	$	5.9	$	7.1	$	9.3
Groupons sold		26,032		39,996		56,457		95,755		152,675		223,469		284,157		388,178

	Three Months Ended,

Berlin	Jun. 30, 2010		Sept. 30, 2010		Dec. 31, 2010		Mar. 31, 2011
Subscribers		92,500		152,800		261,200		396,000
Cumulative customers		9,072		23,007		40,992		69,412
Featured merchants		108		268		303		416
Revenue (in millions)	$	1.0	$	2.4	$	4.5	$	6.1
Groupons sold		47,068		89,321		124,585		229,279

	Three Months Ended,

London	Jun. 30, 2010		Sept. 30, 2010		Dec. 31, 2010		Mar. 31, 2011
Subscribers		159,156		423,660		993,622		1,602,968
Cumulative customers		10,284		34,182		75,897		144,933
Featured merchants		102		232		294		432
Revenue (in millions)	$	1.7	$	5.4	$	10.8	$	20.1
Groupons sold		49,564		126,916		237,756		402,086

Size of Salesforce

North America		2	18	44	76	128	201	348	493	661
International		—	—	—	—	—	1,080	1,224	2,080	2,895

	Total	2	18	44	76	128	1,281	1,572	2,573	3,556


MORGAN STANLEY		GOLDMAN, SACHS & CO.
CREDIT SUISSE


North American Merchant Pool		International Merchant Pool

Description of Use		Operating Segment

Corporate office facilities	358,000	North America	From 2011 through 2017
Corporate office facilities	298,000	International	From 2011 through 2016