Groupon’s Stock – Why It Has Predictably Declined

Most everybody has heard of the company Groupon. It offers major deals on restaurants, products and services in you local area and beyond. Who doesn’t want an awesome deal on house cleaning, Italian food, teeth whitening or even used tires? Up to 80% off! Here is the problem.

Business owners make very little money from Groupon’s compensation system. Essentially they brow-beat a business owner into dropping prices for services at 50% less or more. Then they take HALF of the money from the already discounted price. One business owner in Salt Lake City calculated the numbers and realized he would lose $3 per transaction. How can this benefit the business owner if they are losing money everytime?

When the company went IPO it didn’t go so well for Groupon. So far it is valued at less than half of the IPO price. Google offered billions for the 2 year old start-up of which the owner Andrew Mason promptly turned down. Bad move. Combined with the lack of profit for the business owners and logistical issues with redemption of the certificates in certain industries, the business owner side of the Groupon plan is mostly negative.

The author of this article has done extensive research into a particular niche (cleaning services) on multiple forums and after reading the experiences of every business owner from all of the U.S.; not a single owner had a completely positive experience. Mainly because there was little to no profit after Groupon took their fees. How can a public company have a business model which only serves the consumer? It won’t last long because it seems many vendors have already been dissatisfied from the beginning with Groupon and have spread the word to their colleagues.

In Groupon’s defense, a Groupon offer DOES help get the word out about a local business. It could bring in hundreds of new customers or clients depending on how many offers the business owner decides to put out. This can lead to people wanting to use their services again. However, since these owners are in business to make money, that key element to Groupon’s business strategy falls way short.

For local businesses wanting to market their products or services, a more traditional approach is in order. Internet marketing can be very lucrative if one knows how to do it. Between paid online advertising and Search Engine Optimization, a local business can easily acquire customers at a normal profit scale.

To learn more about internet marketing and how it can benefit your local business, contact The Search Kings at 1-888-828-2212 or visit their internet marketing services site.