In less than 18 months, Groupon, the popular daily deals site, has won more than 700 million users and an estimated valuation as high as $25 billion. But some says its business model — offering deep discounts to users when enough of them want a deal, then splitting the profits with participating businesses — isn't sustainable, and doesn't make sense for the restaurants, spas, dentists, and other merchants that use Groupon. Fair criticism?
Groupon is bad for businesses: "Groupon is just advertising, and fairly expensive advertising," at that, says Megan McArdle in The Atlantic. And it gives consumers and businesses a pretty raw deal. Studies have shown that nearly a third of Groupon merchants, after ponying up a discount and splitting profits with Groupon, lose money on their deals. That's "terrible business." And for consumers, "there's been a real decrease in the quality of the deals available." So much for Groupon being the next Google.
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