Groupon May Expire Sooner Than Expected

<i>As time goes on, transaction costs are commoditized due to competitive pressures, Most transaction fees in these markets gravitate to nickels and pennies, if not less. </i><p>This is one of the best takeaways I've gotten in a while and may be the most damning insight into the Groupon model. Right now it barely[1] works with 50% of the revenues on a Groupon can it still work at 10%?<p>[1] I say "barely" because Groupon is still losing money but its doing so intentionally in a huge growth phase and land grab once it settles into its actual market a bit this can easily swing into "doesn't" or "successfully".

If I am starting to see this <a href="http://dl.dropbox.com/u/20773870/IMAG0004.jpg" rel="nofollow">http://dl.dropbox.com/u/20773870/IMAG0004.jpg</a> in my local stores, I'm pretty sure Groupon is well past it's fad stage. Since it can only operate based on it's exposure/marketing it'll be interesting to see the crash.

With all these articles, I got large doses of Groupon S-1 wisdom from HN.<p>I recently had lunch with an ex-colleague who invariably dropped the idea of building a coupon site together. Everyone is doing so well, we could do even a smaller scale operation and do well.<p>I was surprised that my friend who is quite a bit into affiliate marketing, internet businesses is not even aware of anything wrong with Groupon. He thought they were a slam dunk investment.<p>Moral: There are lot more people who are not aware of the pitfalls and probably be hungry for the shares once Groupon goes public.

Groupon is in the right battle - for small business, yet they are an army of old, low tech, type - sales people cold calling - which is extremely expensive and relatively low efficient. The battlefield of the future belongs to drones. Like these mentioned stock exchanges - quick/real-time response, high volume, low cost, dominated by algorithms. In SMB/deals space it will be something like this - i get up, deciding to skip company cafeteria and go for lunch somewhere nearby, while walking through the hall press couple buttons on iPhone or whatever gadget, in a seconds the automated software of the local merchants (or the bored cashier if business is slow, though software is more plausible case and it would actually be outsourced, hosted Salesforce-style software contracted by the merchant) based on their discount strategies, current load, my status with them (if enabled/exists), etc... would respond with what they have, discounts, specials of the day, length of the line/crowdness, etc,... ie. the response is optimized for and reflects the current condition of the business, click - order if i want and they support pre-ordering, click - map, i'm getting into the car - drive.

Not to take away anything from the GroupOn Critique (which might be able to stand on it's own) - but I've been unable to vet the following statement made by the author:<p>"Commerce One's model was to act sort of like a toll booth, charging companies a fee as transactions passed through these exchanges and eventually expected to make billions collecting toll."<p>That was certainly one of a number of random ideas tossed about, but it wasn't (as far as I can verify from ex-Commerce One employees) the business model.<p>Any CommerceOne Alumni recall the company changing to this model? Anybody know Gupta from that time?

"Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours."<p>The last part is awkwardly worded. It suggests the author may short the stock in 3 days. Not that it's possible on a public market, as Groupon hasn't IPO'd yet.<p>Is the 72 hour part standard disclosure? Not having a position in companies you write about is expected (unless you're Arrington).

A very good article. However, regarding this point:<p>"Groupon may end up being the biggest train wreck in Tech history."<p>I think that webvan.com, pets.com and a few others may provide stiff competition when all is said and done and the numbers are adjusted for inflation.

probably not before a few mutual funds invest a few hundred million of their investor money

Based on the articles I've read and seen, Groupon does not seem to provide a decent return on investment to participating business. This makes me curious as to how much of their business is repeat business versus new business. I have a feeling, if you look at the participating businesses, a vast majority of them will be new for each new cycle.<p>Because there can only be a finite number of businesses, I would imagine Groupon is going to eventually run into one of two problems (should they continue and not flame out before this). Either they run out of cannon fodder (new Grouponees) and implode or they run out of cannon fodder and shrink drastically down to serve a small core of loyal business and rebuild with a different model. Either way, they are burning through capital and businesses at a pretty good clip so I would imagine they are going to run into this situation sooner rather than later.

What if groupon just cold fires their entire sales staff or something, then drastically cuts their rates for businesses, sends all previously contacted owners an email saying, "Hey, we're not butt-raping you on deals anymore, why not start a new campaign?"<p>I mean, that'd probably work.

Anyone know what the reputation of seeking alpha is? I've read a number of their LinkedIn articles and I can't figure out if they are a bunch of well informed day traders or pros or a huffpo style mishmash site.

Is the word "commoditized" here being used to imply a reduction in price?

A good read about the last internet bubble and Commerce One.