Why Groupon is Overvalued

I think the coupon argument is a red herring. The way I see it, there are two types of coupons: the price discrimination variety and the early-adopter-advantage variety. The former category includes things like grocery flyers and has a certain stigma associated with it -- which is why it works (if everyone clipped grocery coupons, the store would be making less money, not more). The latter category is where Groupon fits in, and I don't think it has the same stigma as the former, nor do I think the recession will affect it as much.

Flashing your iPhone to save 60% on surfing lessons sends different social-status signals than clipping newspaper coupons to save 25 cents on canned soup.

Overvalued or not, everybody knows Groupon is working. Customers are crazy about it. My wife checks it as the first thing in the morning. And there's no sign of businesses giving up on offering deals.

As for the businesses who don't like it, if they are looking at making profit from the one-shot Groupon traffic, I think they are wrong. Think of what you spent on Groupon as part of your advertising expenditure. Using Groupon, you are putting your name out there in BIG'N'BOLD along with an opportunity to show them how awesome you are.