I think it’s safe to say that Groupon is my new obsession.  Today I bought a Groupon for $50 worth of tapas and drinks at Poco for just $25, and have bought other Groupons such as $10 for a $20 gift card at Energy Kitchen.  The Groupons range anywhere from meal deals like the previous examples, all the way to experiences such as wine tasting events and even sky diving.

The way it works is that they feature one or two daily Groupons, or ‘deal of the day’ offers, in each city that they operate in (currently 26 cities including New York, San Francisco, Dallas and more).  The deals are local and are usually at steep discounts to regular prices.  In order for each deal to go through, it must reach a ‘tipping point’ in terms of number of purchasers.  For example, the Poco deal that I bought this morning needed at least 200 purchasers to be ‘tipped,’ in which case everyone who orders the deal gets it (at the time of writing, more than 1,500 had been sold).  If the Groupon doesn’t reach it’s tipping point, then no one gets the deal. This pulls in a unique social aspect in which people are incentivized to be viral and spead the word in order to make sure the deal gets tipped.  Groupon does a nice job integrating Facebook, Twitter, and email notifications to let you easily spread the word for each deal.  And if reaching the tipping point isn’t enough incentive, if you refer someone who buys a Groupon, your account is credited with $10 toward your next Groupon purchase.  Super smart.

This model truly creates a win-win for both consumers and local businesses.  Groupon has a great overview of the value they bring to businesses, but as a high-level summary, local businesses get the benefit of great online exposure to hyper-targeted local audiences, guaranteed volume sales (at or above the offer’s tipping point), and a new base of customers that they probably wouldn’t have otherwise reached.  Groupon cites some interesting stats such as 9 out of 10 featured businesses notice Groupon customers coming back as repeat customers, and 97% of Groupon’s featured businesses want to be featured on the site again.

For consumers, Groupon presents some compelling deals which are definitely appreciated [especially when you're a starving student like myself ].  Groupon also acts very much like a city guide and presents a lot of cool things to do.  As someone who is new to NYC, I really like all the ideas it gives me on restaurants to eat at and events to take advantage of.  Lastly, the social aspect creates a great way to organize groups of friends to take advantage of the same offers. Few new sites have me checking back almost daily, but Groupon is one that definitely gets my thumbs up.

Groupon is a startup to watch with some big name backers (New Enterprise Associates, Accel Partners and angel investor Eric Lefkofsky) that have put $35.8M into Groupon’s coffers so far.