Groupon bills itself as a win-win-win for merchants, customers and, obviously, itself. Businesses get exposure, coupon purchasers save dollars and Groupon acts as the money-making middle man. But like anything that sounds too good to be true, this situation doesn't exactly play out in favor of all the parties involved. Especially for participating retailers, whose online reputations are at risk post-Groupon. A group of computer scientists at Boston University and Harvard looked at how businesses that did Groupon deals fared on Yelp. According to Technology Review, "Their analysis shows that while the number of reviews increases significantly due to daily deals, average rating scores from reviewers who mention daily deals are about 10 percent lower than scores of their peers."
Part of the Groupon allure is that it provides marketing for small businesses. But looking at the stats, these flash deals do just the opposite, hurting a merchant's ratings that future potential customers might see. While the numbers of reviews increase post-deal, the ratings decrease, as you can see from this chart.
It's not as bad as it looks. "On the one hand, the data provides clear evidence of increased interest in a merchant after a deal because of the higher number of reviews," explains Technology Review. And, as Business Insider's Pascal Emmanuel-Gobry points out, online reviewers tend to skew evil. "A well known phenomenon with online reviews is that people who post reviews tend to have either a very positive or very negative view of what they're posting." But that doesn't change the nature of publicity. It's bad: A Yelp peruser that cares about ratings over popularity will pass the business over. And like we said, this is about marketing, after-all.