When the Daily Deals Companies like Groupon and Living Social exploded in popularity during the economic downturn, they promised to bring you hundreds of new potential customers by placing your promotion in front of their millions of e-mail subscribers.  Since then, the Daily Deals space has been lambasted in the media for its negative implications to small businesses.

Daily Deals ultimately are too expensive for low-margin businesses.  Companies like Groupon take a 40-60% cut of your revenue on an already discounted offering (e.g. $50 worth of goods for $25).  In addition, coupons are redeemed by customers who in many cases have no intention of returning to your business.  In my opinion, Daily Deals can only be a valuable revenue driver to those businesses who provide service offerings, rather than goods (e.g. Dental or spa services or cooking classes rather than discounted food or beverage goods).

It’s no secret that the Daily Deals space has recently taking a downturn, as evidenced by mass layoffs at many of the top companies and declining stock prices for those that are publicly traded. To combat this, I’ve noticed a recent trend by Groupon that is even more absurd and outrageous.  Simply put, Groupon is no longer just bringing you new customers but they are stealing your existing customers from you.

How you may ask? Groupon has now resorted to buying Google AdWords on your business’s name.  Initially, if you were offering a 50% off Daily Deal through Groupon, they would promote this offer to their customer base that didn’t know about your business.  Now, Groupon steals the customers from you that already know about your business and are actively searching for you.

Let me explain further, I’ve recently noticed that when you offer an ongoing Daily Deal, Groupon may purchase your business’s name on Google Adwords so that their Daily Deal offering will appear above your business in search results. Essentially, they are downright stealing your customers from you and making you lose out on the full-cost of the goods or services you provide.

You can find a few examples at the bottom of this article for Underseas Scuba Center, Tiki Party Boat and Orchard Rejuvenating Med Spa.

In reality, Groupon should not be earning revenue from customers who are already searching out your business, but from new customers who only purchased your Deal because they found it on Groupon.  If your business is looking to offer a Groupon in the future, I would highly recommend that you explicitly require in your agreement that they CAN NOT advertise your Groupon on your business’s name.

Has your business offered a Groupon?  Have you seen this take happen with your business?  Feel free to leave comments below.

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