While economists declare that the recession is over, thousands of small business owners across the country surely don’t feel this way. With an unemployment rate still hovering over 10%, people across the country have been tightening their budgets dramatically, making it harder than ever for businesses to bring in new customers. To compound the problem, small businesses are reluctant to part with their limited advertising budgets, justifiably opting to use the money to keep their bills paid instead.

Despite the bleak outlook, however, not all companies are suffering. In fact, out of the mires of recession, one start-up business has learned not only how to thrive, but also how to help keep other businesses ringing up receipts, too. What is this magical, recession-proof business? I’m talking about Chicago-based Groupon.

Founded in November 2008, Groupon functions as a sort of city guide for deal junkies, offering its users deep discounts on local deals through the use of a group coupon or “groupon.” Every morning, through one direct e-mail, Groupon subscribers receive a deeply-discounted offer for some service or product (previous offers range from sashimi to skydiving lessons). The key to receiving Groupon’s discounts, however, depends on the deal reaching a “tipping point.”

If enough Groupon subscribers decide to purchase the offer, say 200 people, everyone gets the deal. If fewer than 200 were to make the purchase, however, no one would get the deal, and the advertiser would owe Groupon nothing. When deals do go through, Groupon takes their cut, while the rest of the profits, along with a boatload of new customers, go on to the business.

Through this relatively simple strategy, Groupon has quickly become one of the most talked about companies in the country, earning coverage in The Wall Street Journal, Business Week, and the Harvard Business Review, in addition to recent segments on ”Good Morning America” and “The Today Show.” Groupon’s incredible growth hasn’t escaped the eyes of investors either, culminating most recently with a $30 million round of venture funding from Accel Partners and New Enterprise Associates.

To learn more about the company’s incredible success, I contacted Groupon Founder and CEO Andrew Mason for an interview. Despite his very busy schedule, Mason was kind enough to take some time to answer my questions via e-mail.

Digital Pivot: Groupon is barely a year old, and yet you’ve already expanded to 26 cities across the country and secured nearly $35 million in venture funding. The company is predicted to do $100 million in gross-merchandise sales in 2010. When you conceived the idea for Groupon, did you think it would take off this quickly?

Andrew Mason: No. Once you’ve committed to pursue something, I’ve found that the most productive outlook is to be afraid that your idea is totally stupid, and you are about to fall on your face. We’re amazed and humbled that people have responded so positively to Groupon, and we aren’t taking it for granted; every hour of every day we’re working to make it better.

DP: Groupon relies on the principle of collective action. If not enough people elect to participate in a deal, the deal doesn’t happen. Could you explain why having a “tipping point” is such an important part of your service?

AM: It removes the element of risk. Small business owners have very little to spend on marketing. What they do spend, they want to know it’s going to work, i.e. it will drive customers through the door.

On Groupon, the merchant is guaranteed a minimum number of customers. It works, or they pay nothing. By eliminating the risk of wasting money, great merchants will take a shot with us, even after they’ve given up on traditional forms of advertising.

DP: How do you convince businesses to sign on with Groupon? Are some business owners hesitant to take an initial hit in their profits, even if it means getting new customers?

AM: Like this: ‘If I could promise you a bunch of new customers, will you give me a really good price?’ Merchants understand the trade-off. If you’re getting more volume, you can afford to charge less. Even after the cost of the discount and Groupon’s take, the cost of acquiring a customer via Groupon is still an order of magnitude less than traditional advertising. If a business owner wants more customers, he or she will love Groupon.

DP: One of the criticisms of Groupon is that, while the deep discounts do drive new customers to a business, they may not necessarily be creating loyal customers. How do you respond to that?

AM: It’s a great question – to the contrary, the quality of our customers is one of our best features. Our customers aren’t typical deal hunters – they’re young and affluent people that treat our daily feature like a trusted city guide, and the discount is simply an excuse to try something new. Our merchants tell us they get of tons repeat business (here’s one example). To back up the anecdotal evidence, we run a survey with businesses after 30 days, and nine out of ten are already able to identify Groupon customers among their new regulars.

If it didn’t work, businesses wouldn’t come back (97% of our featured businesses ask to be featured again). It’s not like there aren’t a million other options out there (newspaper, television, and radio advertising to name a few) for them to get customers.

DP: The ability to share deals using social media tools such as Twitter and Facebook is a big part of Groupon’s success. How is your approach to using social media technology different from other Internet companies?

AM: Don’t know that our approach is notably different. What’s different is our product – it’s inherently social, so it’s natural for people to use social tools to share our deals. Most of our customers come via word of mouth, and Groupon couldn’t exist without the social plumbing that’s developed over the last several years.

DP: Where do you see Groupon heading in 2010 and beyond?

AM: If we aren’t in your city today, we will be soon. Beyond that, you’ll have to wait and see!

To join the Groupon e-mail list or to learn more about becoming an advertiser with Groupon, visit the company’s Web site.