For me, Groupon went from feeling like a cool outsider way to get a deal to a company squeezing small businesses for money.

In your article, you say, "as a small local business owner, I can’t imagine a lower risk, more cost effective, or higher impact way than having Groupon send a one-time offer to 500k people in the Bay Area about Detour, with a few thousand of them buying it for half off." I think that sounds great. It's like posting a flyer on the bulletin board of the local coffee shop but thousands of times more effective. Basically, you want a community megaphone that you get for a day.

The problem is that once everyone is listening to that megaphone, power dynamics come into play. If I own that megaphone and can only let one person use it each day, I'm going to be picky. I'm going to want 50% of the revenue generated and at least half off so the conversion rate is high. That's driving down what the small business is taking in to 25% of list price or less. I'm going to want to give the megaphone to someone that has no limit on the number sold so that I'm not limiting my revenue which is 50% of the take. I'm going to want to give the megaphone to people who are already popular rather than someone more quirky or with more limited appeal. Target wants the megaphone? Yea, I'm sure people don't know Target exists and. . .well, lots of people will want money off at Target and I'm getting a 50% cut. While we're at it, rather than someone from the community, let's get a pro at the megaphone so the conversion rate will be better.

Ultimately, I just don't think that really works as a profitable, growing company simply because of the power dynamics. When it's new and quirky, it's this weird community megaphone. As you try to scale that up, it just doesn't feel that way. It feels like a company that gained access to people's inboxes as a funky, friendly thing that's now trying to squeeze revenue.

And the problem is that it's hard to scale a daily deal. You can't just send your list 100 emails every day. There's a limit on the number of conversions a small business wants. There's a limit on the number of days in a year. There's a limit on how high you can push conversion rates via writers and such. That somewhat necessitates a pivot if your expectations for revenue growth are high.

I think there are other valid criticisms, but this is what left me lethargic about Groupon. Groupon wanted to scale and daily deals just don't scale nicely. Either you have to start eschewing local coffee shops for the Gap or milk higher commissions or steeper discounts (for higher conversion rates) or more than one deal a day or something. And I think that's where the power dynamic comes into play and people hate power dynamics.

As you said, "If I was working my ass off to build a tech startup and I saw [Groupon] come along and get huge, I’d be like, fuck that. It’s the tech startup equivalent of camping in an undetectable corner in an FPS and sniping people — it feels like cheating." It feels like Groupon was this quirky, funky email promoting one small, local business a day whose profit incentives push it away from being what it started out as. It feels like cheating because it went from that quirky megaphone to something else - something that would gain the revenue needed for a billion dollar valuation. Pizza deals don't drive multi-billion dollar valuations. But it's past 4am here on the east coast so this might be totally incoherent.