How does Groupon make money?

After initial reluctance to voluntarily subject myself to more email every day, I signed up for Groupon and Living Social two months ago.  Now I get daily messages offering me great deals at spas, golf courses, restaurants and the like.  I have purchased only two coupons and in each instance it was for a restaurant where I regularly eat.  So who came out ahead?  If I spend $10 for a $20 coupon, then the restaurant collects $5 up front but ends up with a net loss of $15 because I was going to eat there anyway. Winners: Groupon and me.  Loser: the restaurant.

So why is Wall Street going gaga over Groupon's IPO?  Megan McArdle takes a hard look at the underlying business model.  Coupons provide another way to charge different customers different prices for the same good.  A restaurant can come out ahead if it has excess capacity and attracts new customers with deep pockets.  It can lose big-time if brigades of coupon clippers eat frugally and crowd out regular customers.  Waitstaff also may not be pleased if tips head south. 

This may just be my imagination, but I think I am seeing fewer deals being offered by established businesses and more offers coming from companies I never heard of.  In which case I am going to be hitting the unsubscribe button pretty soon.