"The Daily Deal I got offered today was for a restaurant 30 miles away: how does that make sense either for the customer or merchant?"
but still did not score the points:
The statement is a starkly clear illustration of a big, HUGE fact about GroupOn's business:
It's heavily just a LOCAL business.
So, even if they are in Chicago, New York City, San Francisco, and parts of Argentina and Australia doesn't cut much ice in Podunk. Instead, to make it in Podunk, they just have to be the best in Podunk, and the rest is irrelevant.
For the best 'coupons' in Podunk, customers and merchants in Podunk can go to a GroupOn competitor in Podunk who can be someone on the bank board and the school board, a former mayor, and known very well to all the merchants and most of the customers. This competitor in Podunk can be trusted in Podunk much more than GroupOn by both the merchants and the customers and, thus, get more deals and revenue, can have much lower overhead per dollar of revenue, and can undercut the GroupOn prices.
Such a local competitor has close to a 'geographic natural monopoly': In Podunk, the local guy can sign up several leading merchants just because they know him and trust him (and maybe invest with him); then he can get a lot of local customers signed up because he is well known and has the leading local merchants signed up. Then the rest of the merchants sign up not to get left behind. Then all the customers sign up because all the merchants did. Then all the merchants keep offering deals because all the customers are signed up. And there is no competition more than 60 miles away.
E.g., maybe the guy in Podunk also runs the popular local shopping center based on much the same mechanism of a 'geographic local monopoly'.
A Web site for the Podunk competitor? If that is a problem, then HN developers listen up: Develop a suitable general purpose Web site and lease it to the competitors in each of Podunk, Peoria, Poughkeepsie, Pleasantville, etc.
For the guy in Podunk, maybe there is another little town, Parsonville, 15 miles away: Okay, the guy in Podunk can use his success to expand to Parsonville.
More generally, if there are competitors in other surrounding towns, then he can, one town at a time, use his earnings from his natural monopolies in Podunk, Parsonville, etc. to undercut the prices in these other towns, buy out the competitors, raise prices, and repeat. Relevant terminology includes 'predatory marketing practices' and 'roll-up'.
I don't see how GroupOn can be successful for long with their current business model.