Groupon: An emperor with new clothes?

Reasons I am suspicious of Groupon:

The business model makes more money for small businesses if users do not use coupons. Apparently 20% of coupons go unused. Is that a sustainable way to build a business, on customers who hand over money for nothing??

The business model is based on letting users feel like they are getting a “steal.” When they pay $ for coupons they don’t use, do you think they will still feel that way?

If the merchant offers $20 of  something when a user buys a $10 coupon, Groupon gets $5 and the merchant gets $5. If the user redeems the coupon, the merchant provides a 75% discount in the hope of cultivating return business. One study finds only 4% of users return. Groupon, meanwhile, has taken a huge cut without actually providing a new customer 20% of the time.

So Groupon overcharges for its “service”; small businesses spend loss leader $ and gain what? Temporary customers only interested in a “steal.” Won’t users start to resent throwing money away on coupons they don’t use or on coupons that aren’t that useful anyway?

The head of Groupon is a supercilious jokester who sincerely believes he is changing the world. In a recent Vanity Fair profile, he seems to think he’s invented a brand new business model. He goes so far as to sue other couponing companies–as if anyone can “own” a business model.

And Groupon’s main claim to fame is its tongue-in-cheek ironic missives. Designed so that “advertising” doesn’t sound like “advertising.”

But it *is* advertising, just disingenuous advertising. Perhaps once the novelty of ironic emails wears off, the world won’t be changed, and Groupon’s market value will drop. Down.


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