October 24, 2011, 1:43 PM

Is Groupon Now falling flat?

A report says the instant deals service generated only $1 million in revenue last month.

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Groupon Now, the daily deal operator’s instant discount program, is failing to gain traction with consumers, according to data compiled by daily-deal aggregator Yipit.

Groupon Inc. has noted in each of its filings with the U.S. Securities and Exchange Commission that its long-term strategy is to increase the number and variety of its products via Groupon Now and other offerings.

Groupon Now, however, generated just $1 million of revenue in September across its 25 markets, which was less than 1% of Groupon’s North American revenue that month, according to Yipit. Since launching in May, Now has generated $2.6 million—less than 0.5% of North American net revenue for Groupon during that period. That means Groupon is posting minimal profits from the venture because Now deals have commissions that range from 15% to 20%. That’s significantly less than the typical 40% to 50% cut Groupon takes from the sale of its other, less time-sensitive vouchers, according to Yipit.

“While the platform is still growing, the rate of growth is slowing considerably, a worrisome sign for such a new product,” writes David Sinsky, Yipit data product manager, in a blog post.

Groupon gave no immediate comment.

Groupon has put a large marketing push behind the offering. When the product launched in Chicago, Groupon offered $1 deals at hundreds of merchants. Since then it has offered a $10 credit to entice consumers to download its mobile app.

While a consumer does not need to have the app in order to use Now, the app seeks to make it simple for a consumer to find applicable deals, buy an offer and show the cashier the purchased voucher on his mobile device. Groupon also sends weekly “Your Groupon Now! Weekend Guide” e-mails that highlight a handful of select Now deals in a consumer’s area.

“Despite millions of users knowing about Now, having access to it and being given free credit, they aren’t using it,” wrote Sinsky.

One sign that Groupon knows Now needs work is that after expanding from one market to 25 between April and mid-July, the daily deal provider has not expanded Now to other cities.

Groupon’s struggles with Now stand in stark contrast to other Groupon offerings, such as Groupon Goods, its flash-sale site that generated $2.5 million in revenue in its first eight days, according to Yipit; Groupon Getaways, its travel site that earned $2.5 million in revenue in nine days; and Groupon Live, its online ticketing service that achieved $2.5 million in revenue in 17 days. Groupon Now took 141 days to reach $2.5 million in revenue.

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