Groupon Turns down Google Choosing Pursue a Social Platform and Stores of its Own!

Google’s Local Search has been less than useful for as long as I can remember. A day late and a dollar short if you will! Google tried to buy Yelp and then Groupon and was rebuffed by both. The reasons no doubt are a reflection of what happens to a service when it is assimilated by the Gorg! Much like the Borg it sucks the personality and “human” elements from the service and then makes it part of the collective. Not to mention Google’s utter #FAIL with every attempt at Social anything.

It seems to me there is a central theme to Google’s activity at present. Google has definitely had a keen interest in Mobile/Local search and how that fits with the Mobile/Social gaming industry.

You see this focus not only in the SERPs but in this years acquisitions and the movement of Marissa Mayer to Local from Web search. Google Local has been a joke with spammers manipulating Google Local at will. In fact it was so spammy I often didn’t see the point in convincing customers to invest in it.

 

Groupon Jumps on The Social Bandwagon!

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This morning SEO Training Dojo member Lyena of Netsprinter tweeted an article that not only had news of the offer being turned down it had some insight into the plans that Groupon have for the service in the future. Groupon has quite possibly solved the last mile for tracking local and offline sales that originated on the internet. Today there are few SEOs smiling and Google is likely sadly returning home wondering if it will ever be able to make a major purchase again! I lean towards “no it won’t” on that account.

Groupon Stores will let businesses create and launch their own deals whenever they want and as frequently as they want, without waiting several months to be featured as the deal of the day.

This is a major change and means that the business model is being taken to another level where a business can treat as another sales channel rivaling Adwords in potential revenue with the added bonus of a built in customer base that have freely given information about themselves and spending purchasing habits. This could make for a very interesting campaign launch platform with lots of “knowns” to test CTA and various conversion strategies.

Merchants that claim their store, which Groupon says only takes a couple minutes, will have their deals promoted via e-mail, Twitter and Facebook. There’s no upfront fee, and business will receive 70 percent of each promoted Groupon sold, and 90 percent of each non-promoted Groupon. (This differs from being featured as Groupon’s Deal of the Day, in which merchants only receive 50 percent of each Groupon sold.)

Obviously this is a lot less revenue to Groupon however there are lots of businesses with tight margins that would have a hard time making a 50% customer acquistion cost pay… even over the life of the customer.

Eventually, Groupon says you will be able to connect your feed to Facebook and get updates on when your friends buy deals, follow a new merchant or comment on an offer.

Now that is real Social and when that is in place I can see them being worth the reported $6B however, obviously having turned it down they think they are worth more. If it is as successful as it has been to date in executing their plan I’d say they were smart to pass on Google’s dough. 

 

Conclusions on Google’s Failed Bid and Groupon’s Social Initiatives and Store Plans

Quite simply the quality of people leaving for or looking to become startups log with defections to Facebook  is an indication that Google has become too big to be nimble enough for these exceptional people and engineers to do what they wish to do. I can understand why a two tear old company with exponential growth would spurn the Gorg at any price. I think many of these are seeing the success of Facebook in thwarting and eventually winning (depending how you are measuring) the battle for top destination. IMO, the defections will continue and the exodus to startups will steepen.

Quotations from: Groupon 2.0: More Deals and a Personalized Feed CIO.com

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5 Comments

  1. While I personally think it was poor decision to reject $6Billion, Andrew had already solved his money problems back in April when he sold a small portion of the company to DST for $135million. He said back then that he sold part of Groupon to “solve the money issues” and allow him to work on Groupon without having to worry about money.. When you don’t have to worry about money, you can do things like this..

    That said, if I were DST I doubt that I would be very happy at all.. Their purchase back in April put the valuation of Groupon at about $1Billion.. This means they lost a potential 6x return on their money in about 8 months.. From a business POV even a partial cash out makes sense..

  2. Some good points, Terry. I certainly have to believe that one of the major considerations regarding Google’s offer was the inevitable fate of the company, in G’s hands. Like you said, their success rate has been notably poor.

    @Steve- good point on DST’s probable outlook. Learning more about their response in the days to come may be interesting. If they seem to be in agreement, then it may be that there’s something coming that they think will boost that 6X to 10X or more.

  3. While I agree with your comment “Google’s utter #FAIL with every attempt at Social anything.” I still find it hard to walk away from $6Billion. Granted it’s a power trip for anyone to walk away from that kind of $ But as Steve mentioned does it really make business sense to walk away from that kind of ROI? Not sure. I’m looking forward to see how this plays out! Thanks Terry awesome post!”

  4. @Steve Groupon ios set to make $1B this year…. so at 10X Google was getting a good deal. Consider also that Groupon were swamped with requests and have brought two new offers that address both the biz with low margins (possible reason for types of offers they’ve had in the past) and long waits.

    @Doc thanks! I read where the owner had concerns that Google would let some Groupon staff go.

    @Gabriella… they made $1B this yeear they will likely double that this year so… they will be worth far more than $6B next year or in a public offering. Being the fiorst real Social Networking site to come to market with $B’s in profit… again $6B is under valuing the company.

  5. But is that $1B “profit” or revenue?? Obviously 2 different things.. At 6x valuation, there is no guarantee that they will make $2B next year, or $1 if someone better comes along..

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