Groupon still claims that it will become profitable down the road when it grows larger, but this is difficult to believe given its lack of profits at its already large size. The company’s business model also provides no evidence that this will occur. Websites like Facebook increase in value as they grow because consumers are able to connect with more people, which is their entire reason for using the company in the first place. Groupon, however, does not become more useful as the size of its user network increases because the individuals do not contribute to the company by their membership.
It is common business wisdom that companies should focus on becoming profitable before allowing themselves to grow. Groupon did not follow this model, and exploded in size while it was still turning a negative profit.