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"Where does their money go?"

Multiple Superbowl commercials starring famous people don't come cheap, I would imagine.. and that is one of the ways Groupon has been trying to "party like it's 1999", so to speak.

Not to mention what seemed to be 1/3 of Google's entire advertising inventory. For a while I couldn't go to most sites without seeing a Groupon ad.

I would imagine it's the employees part. A lot of the speculation about Google's motivation to buy Groupon was about the sales staff, which has to be pretty extensive to cover all the businesses in all the cities Groupon operates in.

If it's as simple and as basic as a bloated sales force that can't pull its own weight, then that definitely casts a harsh light on their viability in general.

No, in 2010 they spent $263M on customer acquisition, and only $233M on everything else (rent, servers, employees, bonuses). [1]

[1] http://www.sec.gov/Archives/edgar/data/1490281/0001047469110...

IIRC, in Groupon definition, customer acquisition is money spent on the sales teams.

Advertising takes up a lot of it.