Thursday, December 2, 2010

Google to acquire Groupon?

Groupon is a deal-of-the-day website that is localized to more than 150 markets in North America and 100 markets in Europe, Asia and South America. The company offers one "Groupon" per day in each of the markets it serves. The Groupon works as an assurance contract using ThePoint's platform: if a certain number of people sign up for the offer, then the deal becomes available to all; if the predetermined minimum is not met, no one gets the deal that day. This reduces risk for retailers, who can treat the coupons as quality discounts as well as sales promotions tools. Groupon has seen enourmous growth this year, and was a recent hot topic after being featured as one of Oprah's favorite things (Although, I cant imagine Oprah has used a coupon of any kind since the Reagan Era..). Their rather simple, yet brilliant business model, combined with Groupon's choke-hold on the online localized retail market, has made them a target for all of the major major players in the tech game including Yahoo and Google.

After Marissa Mayer, One of Google's first 20 employee's and most recently the head of Google Search, was put in charge of location and local services, it was widely believed that Google was going to be making a move into the location-based social networking space (think Foursquare or Facebook Places - click for me info). The question everyone asked -Why move one of the most powerful players at Google to head up an emerging, small, and recently reorganized area of the tech giant? After news came out in the last few weeks ago that Google offered CEO Andrew Mason close to $6 Billion to acquire Groupon, the Mayer move seemed to make more sense. "A $5+ billion purchase - even for Google - is not something to be taken lightly, and it would make perfect sense to put Mayer - who is still only 35 years old - in charge of what many believe to be the next big thing." With 700 million global monthly unique users, Google can achieve a wider distribution of the 40,000 merchants that Groupon has lined up that are waiting to get thier deals listed. Will Groupon accept what would be the third richest acquisition in history? For now, the world will have to wait and see.

Late last week, Groupon rejected Google takeover bid, and Bloomberg is claiming they know why. The social deal leader is betting it can keep increasing its valuation after walking away from a deep-pocketed suitor. As the story of Yahoo demonstrates, it's a strategy fraught with risk, but - as Facebook shows -great potential, too.

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