Who Loves Groupon? Groupon.com, a social buying site, is worth “boatloads of love”! I first heard about Groupon through a friend two years ago and once I tried groupon.com, I got hooked to their fantastic deals. Then Living Social and other similar sites started popping up.

I still buy the great deals through these sites and often look for restaurant deals because it gives me the opportunity to try out new restaurants that I had never heard of. Getting a discount makes it worth giving them a try. If I like their food, I would come back knowing the money would be well spent.

Various news magazines have reported that Groupon.com is now valued at nearly 1 billion dollars. Whoa! 1 billion dollars! Can you believe that? Yeah, that is some serious love there.

This is what I had thought until I researched social buying sites for Mozzeria. Some businesses uncovered the downside after trying Groupon or similar sites. At first, they expected Groupon to help bring exposure to their business through Groupon’s large base of followers.

How does it work for businesses? A Groupon representative would meet with the business to explain their procedures. The representative would state that customers respond well to 50% discount which is true. As they discuss the what’s and how’s, if they agree on a ($6 for $13) offer, Groupon keeps 100% of any deal under $10. The representative would also state that the customer would be more likely to end up ordering more than $13 worth food so the business would be able to keep the additional money above $10. If you want a $20 for $40 deal, for example, both Groupon and the business would split 50%.

This means if Mozzeria decides, for example, to go with a ‘$20 for $40’ pizza deal, we are providing $40 worth of food for $20. Groupon starts promoting the deal on their website, and gets $10 leaving Mozzeria with just $10. In reality, Mozzeria is providing $40 worth of food for $10. Keep in mind that Mozzeria needs to cover overhead – rent, payroll, utilities, etc. Mozzeria would lose money – counterproductive to Groupon’s claim to helping businesses?

Realizing this has been a valuable lesson that we need to look at the bottom line. All social buying sites, fortunately, are not like that. Scoutmob.com allows businesses to keep more of the money, and does not require customers to pay upfront. We need to be wary and research these sites extensively and talk to other businesses about their experiences. Now that you see both sides – we need to support businesses by coming back, even after you already used your coupon. If you were me, would you go for Groupon, or other similar sites?