Groupon can work excellently for small businesses. They just have to know what they're doing.
A friend runs a coasteering/outdoor activity business that has used them multiple times. As they have under utilized capacity , the marginal cost of extra customers is near zero (imagine they can take up to 12 people on an activity, but only have 3 booked in).
It doesn't matter if Groupon is taking 50% of this, they still see an increased profit.
The danger is, of course, cannibalizing their existing customer base, but, as a reasonably new company, its much more important to get money, and customers, coming through the door.
That's great if the businesses purchasing Groupons are aware of this and know how to use the deals to their advantage. The problem comes when Groupon doesn't care about the businesses they're selling to at all and push sales that actually hurt those businesses. It's great for Groupon's current revenue, but it's horrible for their long term prospects- there are only so many small businesses you can screw over before they all realize it isn't a good deal for them, and Groupon's business drops off a cliff.
And I'm not excusing the small businesses here- certainly they should do their own homework and determine whether doing a Groupon deal is a good business decision for them, but when Groupon sales people are pushing these things like crack and pressuring businesses into buying what is an obviously negative value deal, they (meaning Groupon) won't get good referrals in the business community, they won't get repeat customers, and they'll run out of 'users' to exploit.
From all accounts it seems sales reps at Groupon have no interest in helping their customers come up with deals that actually make sense and are only interested in volume because they get commission bonuses- this is not a long term business model.
Groupon is presumably taking 50% of "50% of this"? And surely even for a service orientated business 25% is getting pretty close to the fixed cost base (fuel, insurance, kit, etc)?
A friend runs a coasteering/outdoor activity business that has used them multiple times. As they have under utilized capacity , the marginal cost of extra customers is near zero (imagine they can take up to 12 people on an activity, but only have 3 booked in).
It doesn't matter if Groupon is taking 50% of this, they still see an increased profit.
The danger is, of course, cannibalizing their existing customer base, but, as a reasonably new company, its much more important to get money, and customers, coming through the door.