Its simple math:

Groupon wants you to give them your product for 75% off, they sell that product for 50% off and keep 50% of the revenue.

Its fucking retarded. My friends in SF that own lots of businesses refuse to work with groupon - its a horrible deal.

I don't think it's really that simple. Here's their business model:

a) The customers sign up for those offers for free, and can buy certain things for less than the normal price. b) The business owners will lose a percentage of a sale (they might have never made) and in exchange get new customers to check out their place (who, if they like it, will come eat there again.) Instead of spending money on advertising, this is a pretty sure way to get people visit your restaurant. c) The "coordinator" gets a cut.

So, ideally, it's really a win-win situation for everyone involved. Also, I don't think it helps to dismiss the whole idea up front as "its fucking retarded."

Groupon seems like a better solution for small businesses than advertising in a newspaper (pre-craigslist).