Why would Google want to buy Groupon

by Peter Young on December 2, 2010 · 0 comments

Its been quite big news this week – and certainly raised a couple of eyebrows both within the SEO community and the wider business world. Prices for the acquisition vary between $2.5 Billion and $6 Billion depending on what day of the week it appears to be – however there is no doubting that this is likely to make a sizeable dent in the rumoured $21Billion acquisition budget.

More recent reports would suggest that figure is between $5.3 to $6 Billion more than they brought both Doubleclick and Youtube for, and just fractionally less than what Yahoo is valued at at $10 Billion. When you take into account the lack of any direct intellectual or technological property, then that figure would seem excessively high for an online property who could be very quickly created by an organisation with the resources of Google. Further to this, there are no obvious barriers to entry, something to which you would imagine would have come into the mindset of any due diligence analysis.

Add to this Suchanta Mulpuru from Forrester Research suggests other reasons why this seems a balmy idea:

  • The increasingly competitive nature of the industry
  • Merchants themselves aren’t still fully brought into the idea.
  • List Quality
  • No track record
  • Its wont transform Local Search
  • Potential market size

With all that in mind, what could Google possibly want with an organisation which doesn;t appear to have much going for it. Certainly many of the articles I have written so far would suggest Google must be mad – however this was something we recently discussed on the State of Search radio show with Bas van den Beld and Roy Huiskes.

I would suggest one of the biggest reasons Google may be looking at the Groupon deal are two fold

1) Its current focus on Local

One only has to look at the migration of Ms Meyer’s role into Local to see how important Google are taking Local Search. With the traditional search market now well and truly in the bag in much of the world, Google are now focussing on the increasingly competitive local search market, with recent results page changes and the launch of Google Hotpot further evidence of this.

One may ask where Group on fits in – and why a more evolved Hotpot potentially couldnt fix that problem. Well essentially they are two different products, Groupon is a deal-of-the-day website that is localized to major market whereas Hotpot is essentially a peer review format.

However lets take a potential purchase of Groupon into the mix. All of the sudden you have boxed off an entire local framework – the ability for users to receive sales offers from the Groupon framework – and then subsequently review them within the self same vendor. All of the sudden its a far more attractive local offering in its own right.

When one considers that Ebay has just bought milo.com, Amazon is looking at buying Living Social and you get an idea of just how big the local battleground is going to get over the coming years

2) Its increasing focus on Social

Groupon professes to have around 33 Million signed up users, many of them actively engaged particularly across health, fitness and beauty. With use of Google accounts often sporadic, Groupon would offer a social destination from which users could actively engage with their Google accounts – something I would suggest Google has very little of within its current product inventory – as many others are often not useful for the general public.

Adding a tool such as Groupon would allow Google an interface in with the wider public – particularly in terms of local priorities and behaviours something which increasingly could be used to personalise and influence existing inventory.

Rumours suggest Yahoo were also looking at Groupon back in October, offering a rumoured $3 Billion, so in that context one would suggest that the figures being mentioned for Google’s acquisition are not that crazy. Some may suggest this may be crazy money but in the new local war – this could be just the shrewd move that could really pay dividends for Google….

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