Groupon Aims to Emulate Facebook, Not Yahoo, After Walking Away From Deal

Much like the early days of search, businesses are overpaying for a new form of advertising. Advertisers are willing to pay ridiculous amounts for a Groupon deal, so Groupon's sales force has evolved to exploit this extremely lucrative source of revenue. That's just how it works early on. As the market matures, I believe the price of deals will stabilize at a level that makes it a better value proposition for businesses.

I know a lot of merchants have been bitten by groupon coupons that turned out to be big money losers for them. But this seems to me more like a teething problem for groupon than a long-term issue. With time the system should mature so that ridiculous coupons aren't getting produced any more.

I just ate a delicious burger at The Counter in Chicago on a Groupon two days ago. This is noteworthy because I bought 4 Groupons to The Counter last year. In 2009 they sold 5,269 $15 for $30 Groupons. This year they sold 6,932 $10 for $20 Groupons (and I bought 4 again).

To me this indicates that some merchants are pretty pleased with Groupon. The lower value Groupon offering this year is probably an attempt to turn more of The Counter's Groupon visits profitable, since going over $20 there is a lot easier than going over $30—especially with two people.

It's only one data point, and maybe the people at The Counter are just really dumb, but my guess is that the first Groupon offered positive ROI, and they expect to do even better by tweaking their latest Groupon offer.

Andrew Mason has publicly said (at Startup School and other places) that they have a 97% satisfaction rate from merchants. Groupon clones exist because there's such a long waiting list to be featured that merchants go elsewhere while they're waiting. The fat margin Groupon charges gives the restaurant a lot of editorial and consulting about how to best structure the deal to get maximum exposure, customer satisfaction, and profitability for the merchant.

There are anecdotes of unsatisfied businesses but statistically, everyone is winning for now.

Anecdotally, I've heard much negative and not much positive. My regular cafe tried them out and had basically the same reactions I've heard elsewhere:

- 50% off coupon + 50% to Groupon = 75% off to the biz.

- The customers using Groupon don't translate into repeat customers.

- The customers using Groupons get nastier than regular customers - especially those who try to use four coupons in a row.

Why would they want to buy Sun?