Groupon can work excellently for small businesses. They just have to know what they're doing.

A friend runs a coasteering/outdoor activity business that has used them multiple times. As they have under utilized capacity , the marginal cost of extra customers is near zero (imagine they can take up to 12 people on an activity, but only have 3 booked in).

It doesn't matter if Groupon is taking 50% of this, they still see an increased profit.

The danger is, of course, cannibalizing their existing customer base, but, as a reasonably new company, its much more important to get money, and customers, coming through the door.