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Winter-Spring 2012 Table of Contents

Is Groupon Bad for Business?

BU researchers shed light on the cons of daily deals

| From Commonwealth | By Barbara Moran

A study by John Byers (left) and Georgios Zervas found that Yelp reviews mentioning Groupon gave lower ratings. Photo by Kalman Zabarsky

Online daily deal sites like Groupon are generally great for consumers, offering deep discounts on things from restaurants to sporting events. But 
are they good for business?

John Byers, a College of Arts & Sciences associate professor of computer science, and Georgios Zervas (GRS’11), a postdoctoral fellow at Yale, worked with Michael Mitzenmacher, a professor of computer science at Harvard, to find out. The researchers, who collected a massive amount of data over a six-month period, found that for merchants, Groupon cuts both ways.

From January 3 to July 3, 2011, the researchers monitored every Groupon deal offered in 20 cities—16,692 deals altogether. At the same time, they collected data on Facebook “likes” tied to the deals and later gathered data from the daily deal site LivingSocial and the review site Yelp. For each Groupon deal associated with a Yelp rating, the researchers collected all of the reviews posted on Yelp through August 2011. They found a surge in reviews from new customers after a Groupon offer, but they also found that reviewers mentioning the words “Groupon” and “coupon” give “strikingly lower rating scores” than those who do not mention those terms. Reviewers mentioning either keyword offer ratings that are 10 percent lower, on average, while the ratings of the small fraction of reviewers mentioning both keywords are more that 20 percent lower, on average.

The findings, published last September in the online journal arXiv (pronounced “archive”), call into question the very foundation of daily deal sites.

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