

The Bull's Case For Groupon  - pbreit
http://www.businessinsider.com/the-bulls-case-for-groupon-2011-8

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joe_the_user
_Groupon has finally found a way to get local businesses to spend on
advertising, which is a ginormous market._

Uh, Groupon has some ways to spend enormous amounts of money to get a few
businesses to waste some money on ads.

What Groupon probably knows by now and anyone who invests in it will find-out,
is that at the end of the day, local businesses simply don't extra money to
spend on advertising. Local businesses such as restaurants or food store are
distributing scarce resources with a low margin. They are mostly "stones" and
you can't squeeze "blood" out of them. So its not just that Groupon's model
won't work and that Groupon has no customer loyalty. It's there's just no
alternative model that could work.

If Groupon were to somehow 100% succeed and every small business had to pay
them something to get customers, they would simply face a rebellion as the
average, pushed-to-boards small business owner realized they'd just gotten one
more fixed cost that was bring them nothing. I mean, the thing that's not
understood is most small businesses have no economies of scale, most small
businesses have low profit margin. Small businesses altogether represent a
huge chunk of capital but very little profits. Most small businesses _fail_ \-
think about it. If a given field offered serious profits, a large business
would have already taken it over.

