By: Arthur Cooper
Submitted: 2010-12-07 12:17:49 | Word Count: 664
Google’s latest plan for World Wide Web domination is going local. Google has been targeting the local market heavily in recent months, and have now turned their attention to Groupon.
Groupon offers daily discounts from local retailers, but enough people must sign up for the deal in order for it to be validated. This adds a social element to bargain shopping, making the site fairly popular.
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Since its inception two years ago, Groupon has acquired over 12 million users and has brought in $50 million per month in revenue. Apparently, Groupon turned down an offer from Yahoo that was estimated to be around $2 billion.
Additionally, Google upped its initial $3 to $4 billion bid to between $5 and $6 billion, after news of the company’s resistance spread. If Google acquires Groupon, it would be the company’s biggest purchase yet. So far, the company’s most expensive purchase was DoubleBuy for $3.1 billion. Groupon would surpass that cost by nearly double.
Some models project that by 2015, Google’s bread and butter, paid search advertising spending will plummet. However, spending on email advertising (like those campaigns pioneered by Groupon) are projected to double in profitability.
Advertising using keywords on Google can be expensive, and most small businesses acknowledge that if you don’t spend at least $1,000 a month on it, it’s just not worth it. The problem lies there. Most small businesses spend a total of $1,000 a month on all their advertising, print media, online or television, so it’s unrealistic for them to put all their eggs in one basket. That’s why Google has struggled to tap into the local market as of yet. But, acquiring a company like Groupon would help to bridge that gap.
However, with Groupon’s recent growth rate over the last two years, it’s not terribly clear whether Groupon even needs Google. They’ve had almost a half a billion dollars in profits, and 25 million subscribers across 30 countries, and are gaining momentum every day. With that type of track record, who’s to say this deal would help Groupon? It may even be a fairly parasitic relationship with Google taking advantage of everything Groupon has to offer and not giving much to Groupon in return.
From Google’s perspective, it’s a smart move to try and get Groupon. It will help them fill a need they’re not adequately meeting right now. However, from Groupon’s point of view, they’re doing just fine on their own. What could Google offer Groupon? Exposure to potentially billions of users? Perhaps. But who’s to say they wouldn’t have gotten those users on their own over time? They’ve already tapped into the Facebook market, which is expected to have 1 billion users next year.
Time will tell how this deal plays out, and who will get the most out of it.
