Groupon sells local merchants with an offer that's easy to say "yes" to

Groupon is a stand out in a very difficult and competitive market: mobile local search. The company has earned its lofty valuation with its keen ability to find, sell and retain local merchants ahead of competitors. They do so with an offer to local merchants that is easy to understand, is time sensitive and easy to say "yes" to.

This week’s Businessweek ran a piece on Groupon vs OpenTable (with mentions of Yelp). Businessweek rightly asserts that Groupon earns its lofty valuation because of its sales efforts and proposes that the company’s ability to acquire local advertisers is its competitive advantage.

Groupon raised $135M in April - a significant venture round which valued the company at $1.35B. Backed with this war chest, the company has added hundreds to its salesforce and these folks are selling local merchants with great success. The company is also reaching consumers at a blinding pace and has nearly caught up to Yelp in consumer reach.

Yes, it’s impressive that the company reaches 8M deal-seeking consumers and has tapped viral word-of-mouth marketing, but they give away $50 for $25 and still spend heavily on Google and Facebook to do it.

Let's look at some of the numbers: Businessweek reports that Groupon now has approx 3200 employees with half (1600) in sales. I assume this is an error and that the company intended to report 1600 employees with 800 in sales. Crunchbase reports 1000 total employees.

Assuming 800 in sales and 230 cities served, the company averages 3.5 sales resources per city. The company's model is to sell one Groupon per day per city. That means each sales rep is selling – on average - 2 per week.

As a comparison to the analysts' estimate of $1.35B for the privately held Groupon, rumors swirl that Yelp turned down $550M from Google earlier this year and received an offer of $750M from Yahoo. While Businessweek reports 17M Groupon users, Compete has Groupon and Yelp fairly close (10M uniques for Yelp, and 8M for Groupon) Using the Compete numbers, Yelp is valued at $75 per unique user compared to Groupon's ~$170 per unique user.

If you believe the numbers, this is a significant premium for Groupon's ability to find, sell and retain local merchants.