 $6 Billion For Groupon: Is Google Overpaying? |
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| Debbie Johnson |
 Dec 1 2010, 12:52 AM
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$6 Billion for Groupon: Is Google Overpaying?
The Google-Groupon deal isn’t just $2.5 billion. The rumored price is way too low. According to All Things Digital, Google has offered $5.3 billion for the social group-buying website with an additional $700 million earnout based on performance. If the deal were to happen, it will be Google’s largest acquisition ever.
Although Google has multiple products, it is essentially a company that sells ads. Groupon has succeeded in establishing ties and deals partnerships with local and small businesses; something that Foursquare, Facebook and Twitter are all trying to achieve.
Adding Groupon into its range of products would automatically place Google as the king of local business, keeping it ahead of the competition. Most importantly, it is Groupon’s knowledge on local businesses that will help Google further expand its ads business. Google business listing and AdWords are some products that are able to seamlessly integrate with Groupon’s model.
$6 billion for Groupon is a hefty price to pay. But it is better to acquire Groupon now than a year later or so. I’m sure the price tag wouldn’t be just $6 billion if Groupon were to dominate the local business market further. Google is paying a high price to prevent competitors from snapping up Groupon too.
We have witnessed how the search giant has slowly transformed YouTube into a money making machine (through ads) and we are likely to see the same transformation in Groupon as well. Plus, Groupon itself is already a profitable business. It just needed more financial support to expand faster and farther across the globe.
With the right strategy (which Groupon obviously has) and Google’s financial muscles, Groupon will grow at breakneck speed. In short, this acquisition blocks out competitors and also provides Google with expandable and sustainable revenue. It is $6 billion well spent.
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Replies(1 - 9)
| Debbie Johnson |
Dec 8 2010, 09:26 AM
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Groupon Says NO to Google’s $6 Billion Offer
Big news this morning after a big week of Google Cloud Dev, Real Estate & Chrome OS news. Groupon, the group buying and crowdsourced discount service, has reportedly turned down a Google acquisition offer valued at $6 Billion ($5.3 billion w/ $700 million earnout). Groupon, which is said to bring in annual revenues of $2 billion, must have some big things planned after turning down the $6 billion – or did they just use the Google offer to set the grounds for future valuation?
With $2 billion annual coming in, and expected GROWTH, the possibilities could include an IPO, expansion and spin offs, or maybe a future MUCH LARGER acquisition by Google, Microsoft or possibly even Facebook.
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| Debbie Johnson |
Dec 8 2010, 09:36 AM
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Groupon Makes $2 Billion Annually
You should have heard by now. Groupon has rejected Google’s offer. It has decided it is best to stay independent.
One of the reasons (as I believe) is because it is able to generate $2 billion in annual revenue independently, way more than the speculated $500 million to $600 million. It makes Google’s $6 billion offer insignificant and the team knows Groupon is still far from reaching its fullest potential. After all, the social group-buying start-up is just 2-year-old.
All Things Digital was first to report Groupon’s $2 billion annual revenue figure.
Groupon makes money by charging 50 percent of the revenue paid out to local merchants. Its attractive business model is the result of successful direct sales combined with the social network effect. Groupon was profitable in its seventh month. Even Facebook and Twitter have not been able to achieve such revenue growth in such short time.
Google’s $6 billion offer looked irresistible and the media, including us, created the impression that the deal looked certain. I first started to doubt the Google-Groupon deal when Groupon announced its acquisitions in Asia. The timing isn’t right to announce acquisition deals when Groupon itself could be acquired by Google.
So there, the deal didn’t happen. We will see how Groupon would go on to dominate the local deals market. It also makes me wonder what will Google do next.
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| Debbie Johnson |
Jan 5 2011, 02:05 AM
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Is Google Looking to Deal Groupon a Death Blow?
Following the much publicized courtship of Groupon then eventual rejection that Google got, many questions are swirling around the search giant as to what they will do next in the space they were looking to buy into.
Google’s VP of Consumer Products, Marissa Mayer, did an interview for Mediabistro’s WebNewser and was asked about next steps in that space. The gist of the answer (that starts around the 3 minute mark) is this
We already do things like this with coupons etc …. We are looking at how we can take that technology and put it to use in the location space.
It’s the location space component that Groupon currently doesn’t have and Google could have added to the deal giant’s already impressive repertoire. Now without the Groupon effect, you get the feeling that Google would like to utilize their location, places, mapping and more to allow users to walk down a street and get a Groupon like offer from anyone while the potential customer is right there. NFC technologies and more can make this a quicker reality than many might think (especially with the rumblings that next generation Android devices have parts of this already in place). Gotta admit that if that can be harnessed and delivered so the end user doesn’t go batty with offers every second, this has real potential.
I also wouldn’t underplay any drive that might have been created within Google after they were publically spurned by Groupon. What better way to say “I told you so” then by doing it better themselves and taking 50% off of Groupon’s value?
The big question that remains of course is “Can Google compete with Groupon in this space at all?” If they show signs of being able to hold their own then the race is on. Oh and we did all of this ‘analysis’ without even considering Facebook in the equation.
So will location plus the deal be the real holy grail of this space or will Groupon’s current model be enough to keep it in the front of a very well funded and revenue hungry pack?
Welcome to Speculation Station. What’s your take?
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| toney |
 Feb 19 2011, 04:52 PM
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QUOTE(Debbie Johnson @ Dec 8 2010, 09:36 AM)  Groupon Makes $2 Billion AnnuallyYou should have heard by now. Groupon has rejected Google’s offer. It has decided it is best to stay independent. One of the reasons (as I believe) is because it is able to generate $2 billion in annual revenue independently, way more than the speculated $500 million to $600 million. It makes Google’s $6 billion offer insignificant and the team knows Groupon is still far from reaching its fullest potential. After all, the social group-buying start-up is just 2-year-old. All Things Digital was first to report Groupon’s $2 billion annual revenue figure. Groupon makes money by charging 50 percent of the revenue paid out to local merchants. Its attractive business model is the result of successful direct sales combined with the social network effect. Groupon was profitable in its seventh month. Even Facebook and Twitter have not been able to achieve such revenue growth in such short time. Google’s $6 billion offer looked irresistible and the media, including us, created the impression that the deal looked certain. I first started to doubt the Google-Groupon deal when Groupon announced its acquisitions in Asia. The timing isn’t right to announce acquisition deals when Groupon itself could be acquired by Google. So there, the deal didn’t happen. We will see how Groupon would go on to dominate the local deals market. It also makes me wonder what will Google do next. All Things Digital was first to report Groupon’s $2 billion annual revenue figure
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