Groupon Shows Incredible Revenue Growth But Still Posts A Loss For Last Quarter

Deal-of-the-day website Groupon reported that its revenue for the first quarter of the 2011 fiscal year is close to $645 million.

This is a significant increase for the company, which made about $713 million during the entire 2010 fiscal year. The data was made available by the company barely a week after it had taken the first steps towards going public.

Though the revenue registered sky-rocketing growth, but the company is still losing money and Groupon's long-term profitability is unclear, which is why many market observers are expressing uncertainty about Groupon's prospects.

“Investors will have questions about the sustainability and defensibility of this business model, the concern being that these 400 Groupon clones will come and gradually eat away at their market share,” said A.B. Mendez, senior research analyst at GreenCrest Capital Management LLC, The Tennessean reports.

“What does Groupon have to do to maintain market share?”, he questioned.

Groupon has also reported a $390 million loss during the fiscal year 2010, and another $103 million loss in the first quarter of 2011. The company negotiates special discounts with a large number of retailers with the caveat that the discount only becomes active if a the number of people who agree to use it crosses a certain threshold.