Are deal websites just a passing fad?

The Groupon website.

TEXT OF STORY

JEREMY HOBSON: The reports are that a deal could come as soon as today. I'm talking about the rumors of Google's plan to spend $6 billion or so buying Groupon. If you haven't heard of Groupon it's one of a growing number of websites that, among other things, gets you to recommend discounts to your friends.

But is this business model really worth $6 billion? Here's Marketplace's Jennifer Collins.


Jennifer Collins: They go by names like Buywithme or Tipper. In the U.K. there's something called Groupola.

Groupola: Groupola finds fun and exciting activities in your area and presents a daily deal to you and your friends.

Most of these sites organize groups of people to buy deals available for only a short time -- say a half-priced oil change. Ken Doctor is a media analyst for Outsell.

Ken Doctor: There are going to be a lot of people trying to sell coupons, and there are only one or two of these networks that are going to work.

So sites are trying to distinguish themselves to stay in business. For instance -- if you get three of your friends to buy a discounted hotel room on LivingSocial.com -- you get to stay for free. But Barry Libert, author of the book "Social Nation," says these companies are still basically distributors of coupons.

Barry Libert: I don't think those are sustainable models in the social network world without a dedicated community.

He says: the sites will need to work harder to keep their customers hooked. Or at least find a better way to reward loyalty.

I'm Jennifer Collins for Marketplace.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.

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