Groupon prepares for its initial public offering in the same week Google Offers rolls out in Portland, Ore., to piggyback on Groupon's success after failing to buy it last year.
The first week
of June 2011 may be looked back on as the week Groupon and Google (NASDAQ:GOOG)
reached pivotal points in their paths toward contextual discovery.
Groupon filed
for a $750 million initial public offering and is making investors pull their hair
out over the fact that the company
owes
$230 million and is burning through $100 million a quarter.
With 83.1
million subscribers snapping up over 70 million discounts since March, Groupon
is the unquestioned leader in
contextual
discovery. That is, bringing consumers what they want based on preferences
and tastes, rather than making them type search queries to find goods and
services.
This is a
burgeoning market without a barrier to entry that scares financial pros. Throw
a rock, and it seems you'll hit a local deals service. There are even
hyper-local deals that focus on specific niches.
Google, which
coined the contextual-discovery phrase to describe its local search efforts,
tried to
buy
Groupon for $6 billion last winter. Having failed that, it launched Google
Offers in Portland, Ore., June 1. Its first customer was
Floyd's
Coffee Shop, for which it cut a deal to give buyers in that city $10 worth
of drinks for $3.
Google expects
to launch Offers in New York and San Francisco this summer, ostensibly pairing
it with its new Google Wallet mobile-payment service. As the latest Groupon
clone, Google Offers is a far cry from Groupon's 57,000 local merchants in 43
countries.
Unlike
Groupon, which butters its bread solely with local deals, Google sees Offers as
another means to the same end. That is, drawing more users into its desktop
search ad and mobile search ad Webs, according to BIA/Kelsey analyst Michael
Boland.
"Google
clearly has massive search traffic to distribute deals where commercial intent
is high,"
Boland
said. "It also has existing campaigns and relationships with millions
of large and small advertisers."
If Google
Offers builds even a fraction of Groupon's vaunted traction-and without the
massive debt its rival is incurring-Google will show how finished transactions
stemmed from paid search campaigns. That has a value Groupon, which has no
search infrastructure, might not be able to touch.
Google Offers
should over time be better served in mobile, where Google has said 40 percent
of its local searches come via smartphones and can leverage
Google
Wallet to reduce the payment friction.
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