Groupon has become what any e-business dreams to become; after only two years in operation as a daily deals site, Groupon has been offered a $6 billion acquisition offer from web giant Google. But instead of accepting early retirement, Groupon’s owners surprised everyone…they turned the offer down. Now we’re waiting to see whether Groupon just signed its own death warrant, or if Google will show mercy.
Groupon launched in November 2008 as the answer to the Chicago city-dweller’s dilemma: there’s TOO many choices. Too many restaurants. Too many museums. Too many events. And too many reviews about all of the above. Groupon’s purpose is to feature one good or service each day with an incredible discount so users feel comfortable trying something new. The site has spread rapidly and now includes deals for more than 300 markets and 35 countries.
Daily deals sites have been getting a lot of spotlight thanks to Groupon. This week’s Baltimore Sun included an article about a local rookie trying to get in on the daily deals game, Chewpon. While Chewpon is still a newborn, the site is already handicap by launching without a larger database of restaurants. Baltimore is a big and demanding city and a site like Chewpon is just going to die if it can’t keep up with the $7 for $15 worth hamburgers and milkshakes at Z-Burger that Groupon is currently offering me. (Side note: I just opened an account with Groupon, how can a college kid refuse free anything??)
So it’s obvious why Google would find purchasing these company so appealing. The integration of Google Maps and the Groupon service alone is worth millions. Imagine the apps, for example. The problem is figuring out exactly how much Groupon is actually worth. According to Sharon Gaudin’s Computerworld article, the estimates of its revenues vary from $500 million to $2 billion, incredible numbers for a two year old company. Some are skeptical of the $5 billion appraisal since it was last valued at $1.4 billion eight months ago.
Either way, Groupon is taking a big risk to think that they can either get a much better offer, or beat out Google.
Because it will come down to beating the Google machine if it so chooses to make its own model of Groupon, something Google is more than capable of doing. Needless to say not Groupon or any other lookalike, has the resources to beat Google at that game. Groupon’s only chance is if Google tries again with them, something that Dan Olds, an analyst at The Gabriel Consulting Group, thinks could happen:
"I'm not convinced that this deal is completely dead. I think it's only three-fourths dead…Google might take another run at them.”
I think Groupon would be extremely blessed if Google did decide to try again because there are going to be many emerging competitors, such as Chewpon, chomping at the bit, so to say. Groupon should enjoy its view from the top before Google rips it down.
1 comment:
I think the decision of Groupon to reject Google's offer is both economical and intelligent.
The success of Google is indisputable. With over 7 billion dollars in revenue (in the financial period ending 9-30-2010) Google boasts numbers similar to a monopoly. But that does not mean the barrier for entry is completely closed. Take, for example, the success of Coca-Cola. The Coca-Cola company boasts numbers of over 8 billion dollars (for the financial period ending 10-1-2010) revenue, similar to that of Google. One important difference between the two companies is competetion. While Coca-Cola has Pepsi constantly increasing market share and fighting for the best soft drink available, Google is yet to find such a counterpart. That is where Groupon may come in.
The recent astronomical success of Groupon can only lead to future successes, and a company going against the powerhouse Google can turn some serious profits. Take for example Yahoo! Corporation. With a measly 1 billion dollars revenue, their market share compared to Google is comical. Although Google may be competeing against Yahoo and Bing, they are yet to encounter a strong competitor such as Pepsi and Coke.
Although it is true Groupon will never amount to successes of Google, it is not impossible or implausible to believe they could one day become Google's Pepsi.
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