What’s the Secret Success of Groupon?

"Negative working capital: They first charge users upfront, take a cut and pay merchants back later. These businesses basically are financed by their customers."<p>This way they basically can't lose money. If they sell something , they make a profit. If not, they don't make a loss. Ignoring fixed costs, this looks like a good idea to follow for a business, if feasible.

I'd be interested to hear how the deals actually end up working out for the businesses in the long term. Sure, they get people in the door, but at a 50% discount plus the significant cut Groupon takes, they're not left with much. Plus it seems like most purchases are one off visits, as there are plenty of random acupuncture/restaurant/massage/etc deals to never have to repeat a place.<p>Also, the collective buying power part doesn't really exist as far as I can tell -- I can't say I've seen any deals not get the minimum amount of buyers in the past year or so.

Success? Being first to execute the idea in a strong fashion first. However, there are now a considerable number of competitors, and I don't see many potential barriers to entry.

The #1 reason as he states is their crystal clear value proposition. Expanding on that - because it's so clear you can see how effective their advertising campaigns are.<p>They built a huge following just sticking "Get 50% off Sushi in [your city]" ads all over facebook, and have continued with that level of simplicity.<p>When an advertising campaign delivers that message on the banner ad, it's shooting fish in a barrel to convert those users through the lead form, backend process.