New Enterprise Associates

Merchants think socially, act locally

December 11, 2009: 6:59 AM ET

The newest trend in e-commerce: Social media meets local networking.

Social commerce site Groupon offers daily deals to nearly two million subscribers in 27 cities.

Social commerce site Groupon offers daily deals to nearly two million subscribers in 27 U.S. cities.

When David Morton, owner of the Pompei chain in Chicago, signed up with an Internet startup to offer a coupon online, he expected to sell a few thousand at most. Instead, during the 24 hours the coupon was posted on November 22, more than 9,000 local consumers purchased an offer that got them $10 worth of pizza for $5.

The coupon was an all-time sales record for Chicago-based Groupon, a hot startup that brings the buying power of the masses to the social web. After launching with local merchants in its hometown one year ago, Groupon today offers deals to nearly two million users in 27 cities in the U.S. including New York, Charlotte and Austin.

Here's how it works: Groupon sends a daily email to subscribers with a deal, or "Groupon," for a local business or event, like a salon, restaurant, class or concert. If they want in, users then sign on to Groupon's site to pay by credit card and have a year to redeem the coupon.

Before "the deal is on," however, a minimum number of users must agree to buy. More

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