[icebraining]

It can still make sense if you have low marginal vs fixed costs. I know restaurants that are happy to use them to fill up time slots when they're usually empty¹. Since most of their costs are fixed (rent, salaries, etc), they still make a profit at the margin.

¹ I don't know about Groupon, but other deal sites allow them to put certain conditions on the use of the voucher

[wutbrodo]

This is particularly true for businesses that offer things like yoga classes, for whom the marginal cost is ~0. This is obvious to everyone now, but early on most small businesses didn't think of Groupon as what it is: a form of marketing that requires a fairly particular cost structure to be cost-effective.

[davemel37]

I did an analysis of the best deals in the early days of Groupon, and they were all classes that were better when attended with friends. (I think the best selling one in the early days was a cupcake baking class.)

[pbhjpbhj]

One problem early on was Groupon wouldn't allow the limitation of numbers of "deals" sold. That put some people out of business. The people running Groupon were acting well beyond the bounds of morality. IIRC they did correct that after some bad press.

The money lag also killed some small businesses who had assumed they'd get money at the pos to cover their costs and hadn't accounted for increased custom needing greater spending on inputs when money was locked up for 3 months. Cashflow interrupts easily kill a small (micro) business.