I think one of Groupon's big mistakes is how they price everything. Based on what I've read they require businesses to cut the price of whatever they're selling by 50%, and then Groupon takes 50% of the purchase price. That's an absurd price cut for the businesses for what's really an email campaign ... something a business could technically do for free or cheap if they can convince their existing customers to sign up for deals, and leverage social channels to grow beyond existing customers. Obviously, part of what Groupon pitches is that they'll bring you new customers with the goal of converting them to recurring customers, but I think the pricing is all wrong.
Retailers should be allowed to cut their product by a less severe percentage, and Groupon's cut should be a fraction of what they take today. Maybe 10-15%.
Groupon is advertising and needs to be evaluated as advertising not as a price cut.
"for the businesses for what's really an email campaign ... something a business could technically do for free or cheap"
No that's not a real option that is either free or cheap anymore then you can replace traditional advertising by having the owner's family pass out fliers and/or stand around with a sandwich board.
Retailers should be allowed to cut their product by a less severe percentage, and Groupon's cut should be a fraction of what they take today. Maybe 10-15%.