[mixedbit]

I think the main problem with this business model is that it is not really beneficial for large number of advertisers. I heard so many times about local businesses that were screwed by Groupon, because they offered too many deals at too low prices (often below costs) and most people who bought deals did not return later. Groupon seemed not to care about providing a service that is really beneficial to advertisers, instead they concentrated on short term grow.

A lot of successful innovation today is about eliminating middlemen. Local deals companies do just the opposite. They are a new middleman that tries to cut a large percentage from local businesses income. I don't think this is sustainable.