Groupon has very big profit margins and lots of cash. From the article, Groupon charges "half of the discounted price of a voucher". So if the merchant has a

Groupon has very big profit margins and lots of cash. From the article, Groupon charges "half of the discounted price of a voucher". So if the merchant has a deal for something that's $20 and requires 1,000 people to accept, then Groupon's income is $10,000. That also means the merchant's profit margin must either be at least 50% to break-even on the deal after paying Groupon or hope that people buying the deal don't show up to collect it. Otherwise, the merchants lose money. What it comes down to is that Groupon can't charge those types of margins with increased competition, nor will merchants be willing to pay 50% of the deal to Groupon as they increasingly realize the deal isn't profitable for them.