The value proposition to the bargain hunters is clear: they have just saved 50% on a massage. For example, if a local SPA usually charges $100 for a back massage, Groupon will convince the salon to offer it for $50, and then take half of the remaining $50 as “commission”.
The way a traditional Groupon transaction typically works is for a local business to first substantially reduce their price and then agree to give Groupon a large portion of their remaining revenue (often north of 50 per cent). In the case of Groupon the two sides required to make its business model work are (usually bargain-hunting) individuals willing to purchase deals online and (usually small and local) businesses willing to sell their products or services at a discount.
A two-sided network is defined as one where an increase in usage by one set of users increases the value to and participation of a complementary and distinct set of users, and vice versa.
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