Their margins are slightly higher than what I thought they would be. A typical offer might be 25 bucks for something valued at 40 bucks so the merchant is effectively giving a much steeper discount than people think. The nature of this advertising business is not as performance-based as it might appear. It’s not like a typical direct response channel where you run a few ads and do well if conversions are good. Groupon is no doubt doing well now but I wonder how persistent their success will be.
The company says they are on track to generate $100 million in gross merchandise sales in 2010. They take a big cut of that for themselves, generally 30% – 50%.