"Groupon blamed Europe's weak economy and currency fluctuations for its less-than-impressive results"
So not that their business model is offering people money off stuff they didn't want in the first place, then. Well they would say that.
Voucher bazaar Groupon managed to bag a profit for the first time ever in the second quarter of this year - but it wasn't enough to convince investors it's a good place to leave their money. The coupon company's revenue missed analysts' expectations, sending shares sliding down more than 18 per cent in after-hours trading. …
They demand significant discounts from retailers and demand high commissions - however, new entrants often find they get brand presence quite quickly and they get to keep the client contact details for spamming (apologies, marketing to) in the future.
If you buy a Groupon voucher and don't use it (they expire) then Groupon keep the money, not the retailer who provides the service. I reckon they made a lot of their profits this way.
Indeed, the advertising value of Groupon promotions is pretty poor as well - Groupon customers have, pretty much by definition, no loyalty to a supplier, and will go with the next poor sap to make a loss on their services in exchange for 'advertising'. Groupon's reps tend to downplay this element.
I can see two problems with Groupon's model. The first is consistently attracting enough tempting offers. Most of my Groupon emails for the last week have advertised colonic irrigation in the subject line. How much of a market is there for this, seriously? It also doesn't entice you to click on the email and see what else might be inside! More often than not I now just delete the eleventeen emails a day they send me unopened.
The second is repeat business from those providing the offers. There have been some high profile cases where Groupon has sold their voucher deals to businesses they really aren't suited for. I remember someone who ran a professional oven cleaning business complaining they got no repeat business. How often do you need your oven professionally cleaned? Groupon risk alienating small businesses by blindly targeting sales at any firm who'll have them.
I think you've inadvertently hit the nail on the head: the groups that Groupon are targeting are organised around the offers rather than common interests. I know a few people who are "into" the whole thing but it doesn't seem to be creating the desired networks. Anecdotally I have heard from some people that it seems a good way to kick start a business even of the less esoteric kind, but I can't help thinking that tapping into pre-existing groups with a more standard rebate scheme would be better. You can just see how Google's Circle's are predestined for this and at much lower commissions.
Of course, Groupon's business model is almost diametrically opposed to the business it is pretending to serve: they cannot be interested in continually buying new customers (at the expense of existing ones).