Chicago-based Web site Groupon launched in 2008, and already an entire industry of imitators has sprung up around the world.
Groupon partners with restaurants and service providers to offer a major coupon in each city it covers every day, with a catch: The offer is only valid if some minimum number of people sign up for it. This ensures merchants that any deal they offer will generate a high volume of sales, and creates an incentive for consumers to provide free marketing, spreading the word about a deal on social networks to make sure enough people sign up to trigger it. As a result, merchants can offer better deals than they might otherwise.
The service has been a huge hit, selling over 1 million “groupons” in just over a year. Initially operating only in Chicago, Groupon now covers more than 40 cities. The company has raised over $35 million, the latest round coming at a $250 million valuation.
It has also spawned dozens of imitators, operating in cities all over the world. The sites are hugely popular with both consumers and venture capitalists, who have been funding them left and right. Since these sites generally offer one deal per day per market (and no consumer is going to be interested in every deal), there is room for a number of sites to succeed side-by-side.
But it seems almost certain that there are now more Groupon-style sites in major U.S. cities than the market can support long term. Even avid coupon collectors will only check so many sites, or accept so many emails per day. Many of these companies will probably die off within the next few years. It’s also unclear how deal-aggregators like 8coupons and Yipit will affect this competition.
For now, though, deal-hunters have an insane number of sites to choose from.
Area: A parody of the genre ('Groupon' backwards) offering ridiculous deals in 'your area'
Sample Deal: 75% off unlimited trampoline fitness at Gympoline Fitness Studio
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