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I can't really figure out what this purchase is about, if it has indeed gone down. Google usually acquires tech companies. Groupon is a marketing company with

by coryl 16y ago

I can't really figure out what this purchase is about, if it has indeed gone down. Google usually acquires tech companies. Groupon is a marketing company with a good business model. What would Google want to do with this? Integrate into Gmail/Google Checkout?

Ataraxy 16y ago
I would venture a guess and say that this integrates beautifully into their local advertising offerings.
zaidf 16y ago
Google's long struggled to break into local. At 2.5B, Groupon's going to look like an even bigger steal than YouTube.
- dshah 16y ago
  On the YouTube front, I'd argue that things are not really a "steal" unless we they were purchased for well below market value at the time. I don't know that we have much evidence that Google underpaid by a lot given circumstances at YouTube (they were burning through cash pretty fast).
  - zaidf 16y ago
    Fair point. There may have been very few, if any, parties willing to pay what Goog paid for YT. From that angle, it hardly looks like a steal. But if you think about YT's growth and strategic fit since the acquisition, it looks like a steal for 1.6B. Meaning, had a competitor known that YT could be such a key to google, there would be many more takers for it.
seanalltogether 16y ago
Possibly do a seamless integration with adwords so companies building out campaigns can easily integrate groupon. Or better yet integrate it into admob so they start pushing localized coupons to ad based mobile apps.
melvinram 16y ago
There might be a few different possibilities: * As a basic building block, it gives them an established competitive advantage (mostly branding & engaged vendors) against Facebook Places/Local Deals, meaning Facebook would have less leverage over them in the future. They might be interested in the local aspect of Groupon, specifically with the self service they launched recently. Integrating Groupon into Google Places would give their Places section a lot more meat. * They might be liking the pure revenue that the business could produce. You have to remember that during stockholder conference calls, they get questions like "what is the next billion dollar product for Google?" from analysts and Groupon is printing money right now (according the hear-say reports that have been covered in media.) * Google has stayed completely self-service on the sales side of things. Groupon has a large sales staff from what I hear. One possibility (though slightly far fetched) is they might use their experience with successfully managing the Groupon sales staff to ramp up a sales team for Google Apps for the enterprise market.
muhfuhkuh 16y ago
My guess is Maps. Every desktop gMaps and mobile gps app request would contain money-saving coupons targeted for any generic POI search (like "coffee" or "hair salon") in its results.
charlesju 16y ago
Google has 15 B in cash. Every year they make another 8 B in cash. 99% of the revenue for Google comes from Advertising. I think Google has realized what everyone else knows...it's time to just buy random stuff that makes more money.
seldo 16y ago
That's my primary reason for not believing this story. I just can't think of a plausible reason Google would want them. Their technology is laughably simple to replicate and combined with Google's existing advertiser relationships would be much more powerful -- this seems like a clear case of build, not buy (especially when the purchase price is so steep).
- greendestiny 16y ago
  I can think of one. They could bring Groupon into Adwords and sell deals directly from searches. The auction mechanics of Adwords might work well with Groupon. Of course this would rely on Groupon working purely automatically - if it required any kind of business relationships and customer service (like it does now) then Google would kill it.
  - notahacker 16y ago
    Sure automating the process of selling discount vouchers might well work, but they don't need to buy Groupon to be able to create discount vouchers based on an adaptation of their own self-service model. They have more access to eyeballs than Groupon's mailing list anyway Much of the value of the company Groupon lies in the sales team, which makes it an uncharacteristic acquisition target for Google.
    - greendestiny 16y ago
      Yeah maybe I was trying a bit hard. Though there is also the Groupon brand and concept.
- Mystalic 16y ago
  As my entrepreneurial mentor taught me, it's 50% about solving a problem and 50% about figuring out distribution. Groupon's advantage isn't tech, it's massive distribution and thousands of well-trained sales reps with strong relationships in local communities? Do you really think Google could replicate that? It advertiser relationships are definitely not tapped into local communities like Groupon. In fact, that's probably the big reason for the acquisition -- local relationships.
patio11 16y ago
Google is an advertising company which likes models which scale to the moon. Groupon is an advertising company which demonstrably scales to the moon. One possible strategy for Google is to stop messing around with the seven-pack on queries like "Houston Pizza" and start selling the AdWordsGroupon among Houston Pizza shops at the top of that search result. This takes the AdWords learning cliff out of the local retail sales equation, because retailers grok "Check this out: you give us a big discount, we will sell your stuff, then we give you a check for this much and you service people who come in with a coupon -- no money down and no risk!" much more than they do "OK, so you front us a couple thousand dollars for CPC ads and if your QS outperforms competitors in the local auction for the query string, match options dependent, then as long as your CTR is decent we'll send the user to your landing page and you might achieve a conversion which if it has a CPA less than your LTV is a win for you. P.S. If you don't understand that, Pizza Shop Owner Guy, Google Customer Service says to FOAD."
- melvinram 16y ago
  Pulling a bit more on that thread: Not only would it allow them to decrease the barrier to advertising for small and local businesses, it would even allow them to monetize their search traffic much better than PPC text ads. For example, "Houston Pizza" has an average CPC of around $1.55 according to Google's Keyword Tool. If instead, they are able to sell a Groupon for a $30 pizza at the low price of $15, they are at $7.50 revenue. They've just increased their revenue per search 2-5x, depending on how many ads a person used click on before. This doesn't even take into account the increase in click through rate when you can see a ad that basically says you get half off the pizza you already want. If Google is able to get this kind of increase with just 10% of it's advertising revenue ($15.7 billion from just Adwords on Google websites in 2009 according to http://investor.google.com/financial/tables.html http://investor.google.com/financial/tables.html), this deal would pay for itself in about 19 months. Effectively, they are moving higher in the food chain, similar to what they did in the lending market. Instead of selling ad space, they will be taking a commission on the sales they bring you.
  - patio11 16y ago
    As scary as this thought is: I think that is small potatoes. Google ends the day with an email address of a person known to buy heavily discounted pizza in Houston. I think that fact is worth upwards of $50. They can, in a totally automated, split testable, scales to the moon fashion offer him a customized, personal, expires in 4 hours 60% GroupOn for the next 50% off offer they get. Money. Hats.
portman 16y ago
Groupon has over 500 highly trained inside sales reps working out of their Chicago headquarters. These reps have established relationships with probably 100,000 [1] local businesses who are willing to spend money on online advertising. Google's existing advertising products are all self-serve. (Large accounts get assigned a rep, but only ex post facto.) This acquisition makes a ton of sense: Google gains a kick-ass AdWords sales team. With every Groupon sold, they would have the opportunity to ask the merchant "Can I tell you about our AdWords program?" [1] My estimate: 730 days of deals, 3 deals per day, 50 cities = 109,500 deals. Granted, not all cities have side deals, and not all cities have been live for all 730 days, but they're closing in on 100,000 merchants fast.
- hugh3 16y ago
  This acquisition makes a ton of sense: Google gains a kick-ass AdWords sales team But for two and a half billion dollars?
  - bobf 16y ago
    You don't think a kick-ass adwords sales team could generate billions upon billions of revenue for Google?
  - portman 16y ago
    No. Most of the $2.5B is because of the phenomenal revenues that Groupon is currently generating. But Google isn't just interested in revenues, otherwise they would buy a small oil company - they are interested in Groupon because they are profitable and provide an asset that plays well with Google's core product.
bl4k 16y ago
You mean you missed all the buzz about Google being behind on local? The local ad market is $170B a year in the USA alone. Online is 12, TV is 70. Doesn't take a genius.

by coryl 16y ago

Ataraxy 16y ago

I would venture a guess and say that this integrates beautifully into their local advertising offerings.

zaidf 16y ago

Google's long struggled to break into local. At 2.5B, Groupon's going to look like an even bigger steal than YouTube.

dshah 16y ago
On the YouTube front, I'd argue that things are not really a "steal" unless we they were purchased for well below market value at the time. I don't know that we have much evidence that Google underpaid by a lot given circumstances at YouTube (they were burning through cash pretty fast).
- zaidf 16y ago
  Fair point. There may have been very few, if any, parties willing to pay what Goog paid for YT. From that angle, it hardly looks like a steal. But if you think about YT's growth and strategic fit since the acquisition, it looks like a steal for 1.6B. Meaning, had a competitor known that YT could be such a key to google, there would be many more takers for it.

seanalltogether 16y ago

Possibly do a seamless integration with adwords so companies building out campaigns can easily integrate groupon. Or better yet integrate it into admob so they start pushing localized coupons to ad based mobile apps.

melvinram 16y ago

There might be a few different possibilities: * As a basic building block, it gives them an established competitive advantage (mostly branding & engaged vendors) against Facebook Places/Local Deals, meaning Facebook would have less leverage over them in the future. They might be interested in the local aspect of Groupon, specifically with the self service they launched recently. Integrating Groupon into Google Places would give their Places section a lot more meat. * They might be liking the pure revenue that the business could produce. You have to remember that during stockholder conference calls, they get questions like "what is the next billion dollar product for Google?" from analysts and Groupon is printing money right now (according the hear-say reports that have been covered in media.) * Google has stayed completely self-service on the sales side of things. Groupon has a large sales staff from what I hear. One possibility (though slightly far fetched) is they might use their experience with successfully managing the Groupon sales staff to ramp up a sales team for Google Apps for the enterprise market.

muhfuhkuh 16y ago

My guess is Maps. Every desktop gMaps and mobile gps app request would contain money-saving coupons targeted for any generic POI search (like "coffee" or "hair salon") in its results.

charlesju 16y ago

Google has 15 B in cash. Every year they make another 8 B in cash. 99% of the revenue for Google comes from Advertising. I think Google has realized what everyone else knows...it's time to just buy random stuff that makes more money.

seldo 16y ago

That's my primary reason for not believing this story. I just can't think of a plausible reason Google would want them. Their technology is laughably simple to replicate and combined with Google's existing advertiser relationships would be much more powerful -- this seems like a clear case of build, not buy (especially when the purchase price is so steep).

greendestiny 16y ago
I can think of one. They could bring Groupon into Adwords and sell deals directly from searches. The auction mechanics of Adwords might work well with Groupon. Of course this would rely on Groupon working purely automatically - if it required any kind of business relationships and customer service (like it does now) then Google would kill it.
- notahacker 16y ago
  Sure automating the process of selling discount vouchers might well work, but they don't need to buy Groupon to be able to create discount vouchers based on an adaptation of their own self-service model. They have more access to eyeballs than Groupon's mailing list anyway Much of the value of the company Groupon lies in the sales team, which makes it an uncharacteristic acquisition target for Google.
  - greendestiny 16y ago
    Yeah maybe I was trying a bit hard. Though there is also the Groupon brand and concept.
Mystalic 16y ago
As my entrepreneurial mentor taught me, it's 50% about solving a problem and 50% about figuring out distribution. Groupon's advantage isn't tech, it's massive distribution and thousands of well-trained sales reps with strong relationships in local communities? Do you really think Google could replicate that? It advertiser relationships are definitely not tapped into local communities like Groupon. In fact, that's probably the big reason for the acquisition -- local relationships.

patio11 16y ago

Google is an advertising company which likes models which scale to the moon. Groupon is an advertising company which demonstrably scales to the moon. One possible strategy for Google is to stop messing around with the seven-pack on queries like "Houston Pizza" and start selling the AdWordsGroupon among Houston Pizza shops at the top of that search result. This takes the AdWords learning cliff out of the local retail sales equation, because retailers grok "Check this out: you give us a big discount, we will sell your stuff, then we give you a check for this much and you service people who come in with a coupon -- no money down and no risk!" much more than they do "OK, so you front us a couple thousand dollars for CPC ads and if your QS outperforms competitors in the local auction for the query string, match options dependent, then as long as your CTR is decent we'll send the user to your landing page and you might achieve a conversion which if it has a CPA less than your LTV is a win for you. P.S. If you don't understand that, Pizza Shop Owner Guy, Google Customer Service says to FOAD."

melvinram 16y ago
Pulling a bit more on that thread: Not only would it allow them to decrease the barrier to advertising for small and local businesses, it would even allow them to monetize their search traffic much better than PPC text ads. For example, "Houston Pizza" has an average CPC of around $1.55 according to Google's Keyword Tool. If instead, they are able to sell a Groupon for a $30 pizza at the low price of $15, they are at $7.50 revenue. They've just increased their revenue per search 2-5x, depending on how many ads a person used click on before. This doesn't even take into account the increase in click through rate when you can see a ad that basically says you get half off the pizza you already want. If Google is able to get this kind of increase with just 10% of it's advertising revenue ($15.7 billion from just Adwords on Google websites in 2009 according to http://investor.google.com/financial/tables.html http://investor.google.com/financial/tables.html), this deal would pay for itself in about 19 months. Effectively, they are moving higher in the food chain, similar to what they did in the lending market. Instead of selling ad space, they will be taking a commission on the sales they bring you.
- patio11 16y ago
  As scary as this thought is: I think that is small potatoes. Google ends the day with an email address of a person known to buy heavily discounted pizza in Houston. I think that fact is worth upwards of $50. They can, in a totally automated, split testable, scales to the moon fashion offer him a customized, personal, expires in 4 hours 60% GroupOn for the next 50% off offer they get. Money. Hats.

portman 16y ago

Groupon has over 500 highly trained inside sales reps working out of their Chicago headquarters. These reps have established relationships with probably 100,000 [1] local businesses who are willing to spend money on online advertising. Google's existing advertising products are all self-serve. (Large accounts get assigned a rep, but only ex post facto.) This acquisition makes a ton of sense: Google gains a kick-ass AdWords sales team. With every Groupon sold, they would have the opportunity to ask the merchant "Can I tell you about our AdWords program?" [1] My estimate: 730 days of deals, 3 deals per day, 50 cities = 109,500 deals. Granted, not all cities have side deals, and not all cities have been live for all 730 days, but they're closing in on 100,000 merchants fast.

hugh3 16y ago
This acquisition makes a ton of sense: Google gains a kick-ass AdWords sales team But for two and a half billion dollars?
- bobf 16y ago
  You don't think a kick-ass adwords sales team could generate billions upon billions of revenue for Google?
- portman 16y ago
  No. Most of the $2.5B is because of the phenomenal revenues that Groupon is currently generating. But Google isn't just interested in revenues, otherwise they would buy a small oil company - they are interested in Groupon because they are profitable and provide an asset that plays well with Google's core product.

bl4k 16y ago

You mean you missed all the buzz about Google being behind on local? The local ad market is $170B a year in the USA alone. Online is 12, TV is 70. Doesn't take a genius.