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The Coupon Network: Everything You Need To Know About The Web’s Hottest Business Model

The Groupon Paradox

In theory, Groupon's business model is "group coupons" ... Groupon's original idea—to encourage users to form groups to negotiate with merchants—seems to have disappeared ...

Thanks to Groupon, merchants may face a similar, but perhaps even more damaging, fate. Prices are likely to erode as consumers come to expect deals. They will wait for sales to buy, and merchants will find themselves competing ever more fiercely. Meanwhile, merchants' brand power will be eroded as consumers look to Groupon (as they do to Orbitz), rather than to the merchants themselves, for the best deals.

So, you could say that Groupon is opening up e-mail marketing just as Yahoo opened up search. Yes, I said Yahoo on purpose: There is no guarantee that Groupon will be the long-term winner. Other players, including Facebook (which can mine a 500-million-plus customer base), could give it strong competition, using newsfeeds or its evolving messaging functions rather than e-mail.