The Bull's Case For Groupon

Uh, Groupon has some ways to spend enormous amounts of money to get a few businesses to waste some money on ads.

What Groupon probably knows by now and anyone who invests in it will find-out, is that at the end of the day, local businesses simply don't extra money to spend on advertising. Local businesses such as restaurants or food store are distributing scarce resources with a low margin. They are mostly "stones" and you can't squeeze "blood" out of them. So its not just that Groupon's model won't work and that Groupon has no customer loyalty. It's there's just no alternative model that could work.

If Groupon were to somehow 100% succeed and every small business had to pay them something to get customers, they would simply face a rebellion as the average, pushed-to-boards small business owner realized they'd just gotten one more fixed cost that was bring them nothing. I mean, the thing that's not understood is most small businesses have no economies of scale, most small businesses have low profit margin. Small businesses altogether represent a huge chunk of capital but very little profits. Most small businesses fail - think about it. If a given field offered serious profits, a large business would have already taken it over.