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Groupon Economics

By Matthew Yglesias  

"Groupon Economics"

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Via Jacob Goldstein, according to its IPO filing Groupon seems to have achieved its impressive growth through a campaign of aggressive deficit spending:

Maybe this will work out, or maybe it will be a disaster. But it’s worth noting that absolutely nobody thinks it’s categorically absurd to think that what a firm needs to do to maximize long-term profits is boost spending over revenues. The idea here is that there are substantial network effects in the online coupon business, such that one dominant player will earn lots of money and the minnows won’t. Under the circumstances you want to spend what it takes to become that dominant player.

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