Groupon and the Race to Change to Save Its Business

Groupon and its daily-deals cohorts set out to change the way small businesses advertised. Now they’re the ones seeking to change in the face of mounting evidence that its business model doesn’t quite work. Groupon and LivingSocial, both fresh off of bad financial reports, are trying to diversify their business and venture off into the realms, like discounted goods. Startups, meanwhile, are forming businesses with new spins on the daily-deals model. Groupon’s $20-a-share IPO price was driven by merchants who didn’t fully understand how costly running a daily deal is. Though Groupon asserts that 97 percent of businesses that use its services want to be featured again, a separate survey found that 39 percent of merchants that used Groupon said they weren’t likely to run another deal with the company in the next couple years. New research from researchers at Adobe Inc., Purdue University in Lafayette and Rice University in Houston finds that there is a correlation between the hidden factors that cause a business to offer daily deals and the hidden factors that cause the business to fail. This correlation is strongest for certain businesses, like restaurants and spas. (Reuters, MIT Technology Review)