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Google’s Groupon Offer: $5.3 Billion, With $700 Million Earnout

8 points by nreece 16y ago

lionhearted 16y ago
What am I missing here? Groupon: Solid brand, good copywriting, mailing list of qualified buyers... okay, that's great stuff, but where's the defensible advantage here? Do they think customers will be loyal to Groupon when more specialized competitors emerge? Do they think merchants will stay loyal to Groupon and continue to pay a crazy cut? Maybe Google picks up a lot of synergy value for their search and data-mining and integration with other services, but they don't exactly have a great history integrating acquired companies with their existing services. What's the value they're buying in Groupon? I see a company making an unsustainable cut of deals and no defensible advantages long term as competitors emerge to copy their (easily copied) business. Someone enlighten me - what am I missing here?
- danielhodgins 16y ago
  I don't know for sure, but here are my guesses: * Talent * Cash flow * Category-leading brand name * Gain strategic leadership position in rapidly growing market Assume you were to create a Groupon competitor that could potentially overtake Groupon. How much funding would you expect to raise to fund such a startup? Yes, Groupon has a strong position right now. But so did the established search engines when Google came on to the scene.....
- retube 16y ago
  Rightly or wrongly, Groupon is a cash-cow. If they're making $50m/month, given the profit margins (which must be high given that revs are 50% of inventory value which they don't even have to buy/manage/warehouse/distribute!) $5bn doesn't seem too bad. It's a solid multi-national brand with proven scalability, and I'm guessing Google see plenty of more room to expand: given that a large %age of the internet uses Google services, and given all that Google know about their users, they can efficiently and accurately market to a huge number of people. Plus that reach means they can easily defend against competition. So yeah, I reckon this is a pretty solid deal for them.
  - fookyong 16y ago
    * which they don't even have to buy/manage/warehouse/distribute!)* This really is key. Coming from a traditional e-commerce background that includes all of the above, I am quietly envious of the groupon business model. You don't really understand until you've been in the industry, but the logistics aspect of e-commerce really is a massive part of the process. That Groupon have managed to circumvent that in a way that is profitable/scalable is quite an achievement.
ambitious 16y ago
I think Andrew Mason and Co. will take the deal, if only because the payout is so gargantuan for Groupon investors. They must REALLY want this to happen.

8 points by nreece 16y ago

What am I missing here? Groupon: Solid brand, good copywriting, mailing list of qualified buyers... okay, that's great stuff, but where's the defensible advantage here? Do they think customers will be loyal to Groupon when more specialized competitors emerge? Do they think merchants will stay loyal to Groupon and continue to pay a crazy cut? Maybe Google picks up a lot of synergy value for their search and data-mining and integration with other services, but they don't exactly have a great history integrating acquired companies with their existing services. What's the value they're buying in Groupon? I see a company making an unsustainable cut of deals and no defensible advantages long term as competitors emerge to copy their (easily copied) business. Someone enlighten me - what am I missing here?

danielhodgins 16y ago
I don't know for sure, but here are my guesses: * Talent * Cash flow * Category-leading brand name * Gain strategic leadership position in rapidly growing market Assume you were to create a Groupon competitor that could potentially overtake Groupon. How much funding would you expect to raise to fund such a startup? Yes, Groupon has a strong position right now. But so did the established search engines when Google came on to the scene.....
retube 16y ago
Rightly or wrongly, Groupon is a cash-cow. If they're making $50m/month, given the profit margins (which must be high given that revs are 50% of inventory value which they don't even have to buy/manage/warehouse/distribute!) $5bn doesn't seem too bad. It's a solid multi-national brand with proven scalability, and I'm guessing Google see plenty of more room to expand: given that a large %age of the internet uses Google services, and given all that Google know about their users, they can efficiently and accurately market to a huge number of people. Plus that reach means they can easily defend against competition. So yeah, I reckon this is a pretty solid deal for them.
- fookyong 16y ago
  * which they don't even have to buy/manage/warehouse/distribute!)* This really is key. Coming from a traditional e-commerce background that includes all of the above, I am quietly envious of the groupon business model. You don't really understand until you've been in the industry, but the logistics aspect of e-commerce really is a massive part of the process. That Groupon have managed to circumvent that in a way that is profitable/scalable is quite an achievement.

ambitious 16y ago

I think Andrew Mason and Co. will take the deal, if only because the payout is so gargantuan for Groupon investors. They must REALLY want this to happen.