If you think coupons are a good business model, then Groupon makes sense as a distribution model.
If you don't, then I'm not sure why you would think Groupon would magically make coupons better.
Really the social networking version of a buyers' club.
Seemed to only make sense for companies who had no variable cost to use Groupon.
Eg airlines to fill last minute remaining seats. Or museums to drive more foot traffic on historic slow days.
Another variant of the concept is ie La fourchette (the fork), where you can get similar deals, but they are either permanent deals or stay around for longer, so if you don't have anything specific in mind you just search what is available around. Similar rules for drinks.
Groupon just proved, at a larger scale, what was always present in consumer behavior. Of course it wasn't going to be sustainable just like click-through rates for ads dropped off once people got used to their placement at a particular location in the search results. In this case, Groupon capitalized on small-business owners who had a poor grasp of how consumers work.
Are you talking about Groupon here or the businesses? I'd guess Groupon fully knew what they were doing - they know they have a small window where they need to make a killing. Why do they care after that? Why do they care if they screwed over thousands of small businesses? They'll just move on to the next legal scam.
I suppose it is upto the businesses to not fall for such one sided schemes. Maybe it is peer pressure, if every business around them is doing it, they feel pressured to do it too? Maybe a restaurant owner is good at making food, but not that good at running a business?
I hate companies like Groupon...
A restaurant owner I worked with agreed to run a Groupon. They offered a 40€ dinner for two at a 50% discount for 20€. That was already a fantastic deal. But Groupon took 50%, so the restaurant owner got only 10€ per sale. They sold a lot of them.
The Groupon sales person promised them that this would be great advertising, that people would bring their friends, and that they could sell fancy drinks and cocktails to the guests, so they would make a lot of money.
So over the next 6 months or so, every day a few people would show up, redeem their Groupon to get their 40€ meal, order no drinks, and never come back again.
It was a really shitty deal for the restaurant, but it was a fantastic deal for groupon -- they got a 50% cut for selling a ridiculously cheap meal.
Of course, no business owner in their right mind would ever agree to such a crappy deal a second time. So the success of Groupon was based on finding new, unsuspecting businesses who could be talked into offering such a sweet deal.
In the beginning, with all the hype, that was an easy task. So they saw huge growth at the beginning. But it wasn't sustainable growth. Groupon was exploiting hapless business owners that haven't yet been burned by sleazy marketers.
As soon as the too-good-to-be-true deals became less frequent, Groupons customers also started leaving.
I don't understand how anybody who knew anything about the business could think that this was sustainable.