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Google's New Groupon Rival: Is It Really a Deal?

Well, Google clearly hasn't been sitting around moping over the fact that Groupon turned down Google's $6 billion buyout offer. Just weeks after being jilted, Google is now prepping its own coupon-offering platform. Given the huge popularity of Groupon -- more than 25 million coupons sold and a market valuation that could be north of $15 billion -- it's not surprising that Google wants in. But that doesn't make either Groupon, Google Offers, or other online coupon sites such as LivingSocial a smart or good deal for consumers. Fun, yes. Financially savvy? I'm not so sure.

A few reasons the coupon craze might not be such a great win for consumers:

  • You aren't really saving money. Seems to me there is a big difference between clipping coupons to save money on the household basics, and buying a coupon for stuff you like, but don't really, um, need. The coupon for toothpaste, cereal, and laundry detergent helps you lower your spending on necessities. A Groupon or Living Social coupon that gives you a deal on a dinner out, a massage, or those skydiving lessons you've been dreaming of isn't really about saving you money in the classic sense. It's about helping you spend money having fun, with the enticement that you're spending less than you might otherwise would have. Fun is good, but just recognize it as that, and decide if the net after-coupon cost is still within your "fun" budget.
  • The deals can end up being a lot less attractive than advertised. Let's say you spend $50 on a Groupon that carries a $100 value for a massage. Great, a 50 percent savings. But the massage you sign up for costs $150 and then there's the tip; at 20 percent that's another $30. So your total cost is $180. You didn't spend $50 to get $100 of services; you spent $130 to get $180 in services. It's similar to the trap noted in this New York Times Bucks blog post: Pony up $15 for a $30 value at an upscale pizza joint, but end up paying an additional $40 for the salad, wine, and dessert. Something tells me that's the norm for coupon users, not the exception. After all, it's the whole reason that businesses are offering the coupons in the first place. Just keep in mind their motivation isn't to help you save money, it's to get you to spend.
  • It's only a deal if you use it. It's one thing to receive a gift card that you didn't pay for, and leave it unused. But to purchase a Groupon or deal from LivingSocial and then not use it is even more wasteful...of your money. Apparently there are plenty of us doing just that. Websites such as Lifesta and CoupRecoup exist to help consumers unload unwanted and unused Groupons before they expire. Sure, some enterprising folks are using these sites to make a few bucks selling popular coupons that "sold out" for more than their face value. But the sites are also for folks with simple buyer's remorse who want to minimize their loss on a coupon they aren't going to use. To avoid that costly mistake, before you jump at a deal of a day, try to stop for a sec and weigh the odds that you will absolutely, positively use it. Seems obvious, I know. But the fact that there is now a secondary market in online coupons suggests it isn't.
Note that I'm not suggesting that taking advantage of online coupon deals is a patently bad move. Just that it might pay off to realize that this is nothing more than great marketing/advertising designed to get you to spend money. So you need to be on your game to make sure you do in fact get a good deal. MoneyWatch's Farnoosh Torabi offers up 7 Tips to Save Money Using Groupon and LivingSocial. To her list, I'd add to pause before you click the Buy button and ask yourself if a) you will really use the coupon and b) you'll still consider it a good deal once you pay the final bill.

Photo courtesy Flickr user duane_brown

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