Chicago-based Groupon sends e-mail subscribers daily coupons on products and services in their communities when enough people sign up for the deal.
It's popular with small local businesses, such as San Francisco's Mission Minis cupcakes, which received way too many customers thanks to a Groupon promotion.
A $4 billion price tag might seem a little high, but Groupon has established itself as a major player in social buying and Sunnyvale-based Yahoo certainly has the cash to spend.
Usually ahead of the technology curve, Yahoo has been struggling recently. This purchase could signal a new strategy for the company that has been looking for a new direction since new CEO Carol Bartz took over.
eBay made a simmilar move back in 2005 when it bought Skype for $2.6 billion, and Google bought YouTube for $1.65 billion in 2006. Skype has not worked out so well for eBay while YouTube promises to become profitable soon.
Gobbling up Groupon for $4 billion might be Yahoo's way of outbidding the competition with the first bid.