Groupon has also expanded into physical goods, taking on inventory risk, The Toronto Globe & Mail reports. Critics of the company question whether Groupon accurately accounts for its cost of goods sold, or COGS.

But the biggest problem with Groupon may be that it's easy to copy. Amazon.com ( AMZN) owns 31% of LivingSocial, another deals site, and therefore reports that company's numbers. For the most recent quarter, it posted a loss of $93 million on revenue of $138 million, Business Week reported.

Amazon and Google ( GOOG) have also entered the market aggressively. Amazon calls its offers "AmazonLocal." Google calls them "Google Offers," and integrates them with maps and other Google services.

Since Groupon went public late last year, it has been on a steady downward trajectory. From a high of over $26 a share, it now trades at closer to $7 a share. Even at that price, the company is said to be worth $4.46 billion.

This is a company with a shrinking moat that will find new customers increasingly hard to come by. It's a company that can't scale effectively, because it's so dependent on people to organize the deals and write the copy. And over time, people become increasingly resistant to every form of Internet come-on, and the old verities -- give your best prices to your best customers -- always come to the fore.

If I had put money into the Groupon IPO sight unseen, if I were put into it by an aggressive broker, I might think this whole Internet-commerce thing was nonsense. I would be wrong, but as DailyDealMedia notes, I would also be poorer.

At the time of publication, the author was long GOOG.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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