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I was under the impression that this was a good deal for businesses because they'd just offer the product less their normal costs for advertising/marketing, sin

I was under the impression that this was a good deal for businesses because they'd just offer the product less their normal costs for advertising/marketing, since groupon did that for them. They spend less getting the product out (and get an almost guaranteed big order!), it costs less for the consumer, groupon takes a small cut, everyone wins (in theory).

newmediaclay 16y ago
GroupOn isn't taking a small cut, they're taking 50% of each deal. Your theory may be correct if they were only offering the discount, but in addition to the 30% a business has to offer, they then have to pay 50% of the deal to GroupOn. So, GroupOn allows them to eliminate ad costs via the discount, but then tacks their fee on top of it, which crushes any hope of margins for the business.
- enjo 16y ago
  Which is why ultimately group-on will be squeezed. There are group-on clones springing up like crazy, primarily focused on increasingly small niches. Hell I just heard about a mommy-focused version that launched only two months ago and is doing really well. They're also taking a much smaller cut. It's really hard for group-on to defend it's turf, as you only need penetration in one city to supplant them in that city (or at least compete really effectively). Ultimately those cuts are going to be under constant assault. It's really a race to the bottom, but it's going to be a money train until they get there.
  - ja27 16y ago
    Our local newspaper started its own Groupon clone. It could be a great side business for all those struggling newspapers. (Or a great startup business for someone to provide turnkey Groupon clones for all these struggling newspapers.)
  - edash 16y ago
    What's with the intentional misspellings of Groupon? GroupOn? group-on? You reek of bias when you take little jabs at a company by misspelling their name. It's immature and distracts from your more substantive points. I had to stop reading Mark Cuban's blog when he kept writing about MicroSoft. I'd like to think that HN is more mature than this...

newmediaclay 16y ago

GroupOn isn't taking a small cut, they're taking 50% of each deal. Your theory may be correct if they were only offering the discount, but in addition to the 30% a business has to offer, they then have to pay 50% of the deal to GroupOn. So, GroupOn allows them to eliminate ad costs via the discount, but then tacks their fee on top of it, which crushes any hope of margins for the business.

enjo 16y ago
Which is why ultimately group-on will be squeezed. There are group-on clones springing up like crazy, primarily focused on increasingly small niches. Hell I just heard about a mommy-focused version that launched only two months ago and is doing really well. They're also taking a much smaller cut. It's really hard for group-on to defend it's turf, as you only need penetration in one city to supplant them in that city (or at least compete really effectively). Ultimately those cuts are going to be under constant assault. It's really a race to the bottom, but it's going to be a money train until they get there.
- ja27 16y ago
  Our local newspaper started its own Groupon clone. It could be a great side business for all those struggling newspapers. (Or a great startup business for someone to provide turnkey Groupon clones for all these struggling newspapers.)
- edash 16y ago
  What's with the intentional misspellings of Groupon? GroupOn? group-on? You reek of bias when you take little jabs at a company by misspelling their name. It's immature and distracts from your more substantive points. I had to stop reading Mark Cuban's blog when he kept writing about MicroSoft. I'd like to think that HN is more mature than this...