The Groupon phenomenon

As you might know, the idea is to offer one deeply discounted deal, every day, for 24 hours, and only if a minimum number of people commit. So forwarding emails each morning with the latest bargain has become a kind of social networking sport. Groupon is getting knocked off by upstarts all over the world, but with $135 million in funding the company doesn't have much cause for concern (it just bought a European competitor). From The Big Money:

Groupon turned its first profit in 2008, the year of its launch, and has since expanded from Chicago to 140 cities across the world. The company has at least 4.5 million subscribers, and about 98 percent of the deals it advertises are successful. So it's not rocket science to see why Groupon supplies the basic operating principle for most other group-buying sites out there, such as LivingSocial and Scoop St.

Bundle's Janet Paskin takes it further:

Psychologically, sites like these hit us right where it counts, marketing experts say. Limiting each deal to a single day, and counting down the hours and minutes left, prompts us to Act Now! Add in the specter of exclusivity, and the sites confer a little glow of specialness on recipients: by signing up, you've done something smart, and you're getting something good. Way to go, you! Lastly, the deals themselves are compelling: they must offer substantial savings -- enough, say, to encourage an otherwise careful budgeter like Jennie Vinson to buy laser hair removal treatments. "I've always been curious, but I wasn't about to spend $750," said Vinson, 32, from Portland. "At $99? Why not?"

Well, maybe because you don't really need hair removal treatments, at any price. This seems to be a lot more about the chase than the prize. Paskin also points out that folks will often spend more than the value of the Groupon voucher. If it's a restaurant, you're still stuck with tax and tip (and often alcohol). Such a deal.