Google Groupon Failure Follows Yelp as Second Local Miss

By Clint Boulton  |  Posted 2010-12-06 Print this article Print

Ding dong, the Google Groupon deal is dead, the wicked Google Groupon deal is dead. La la la, la, la, la.

Google has purchased 42 companies in 2010, including Phonetic Arts and Widevine Friday, but for the second year in a row Google whiffed on locking up a popular Internet startup that would have beefed up its local search and advertising presence.

Don't mean to bask in the glow of that just imploded deal, in which the company allegedly walked away from a stunning $6 billion payday to take the IPO route.

Nor am I going to gloat that Groupon CEO Andrew Mason did it because he was concerned about how his team would fare toiling under the aegis of the search giant, not to mention how it could impact the popular local deals site's business relationships. If that's true, that's ballsy and admirable. Google groupon fail.png

I will put it into perspective, though. This could be the best deal that didn't come to fruition for Google. The search engine already has solid local search and ad offerings, with Google Places, Place Search and the Boost ad platform for SMBs.

$6 billion is a ton of money to pay for a company that banks half of the dollar amount of the coupons exchange from passing them around via daily batch e-mails all over the country.

Forrester Research analyst Sucharita Mulpuru put it into perspective when she noted:

  • $5 billion is an absurd valuation for a company that is in a business with virtually no barriers to entry and is younger than my toddler.
  • That's more than what they paid for YouTube, which had a heck of a lot more traffic when it was acquired than Groupon has now.
  • It's a huge chunk of the cash that Google has on hand. That's a lot of money.

She also notes Groupon will be challenged to get people to spend more beyond the upfront discounts and that it's a "pretty big bet to place on something that could be a one-trick pony" for whose future is uncertain because it's model is popular. LivingSocial, Gilt and others are also doing the coupon thing, to lesser success.

Some say this deal would greatly boost the social quotient at Google. I disagree.

I've been a Groupon user for three weeks and I have to say the "social" opportunities are rather stunted. You can pass around deals to people via Facebook, Twitter and e-mail.

Sorry, that's more like friendly spam than real social utility to me, and if Google wants to beef up its social status, it can surely do better in-house.

I grant that Groupon would have helped Google counter Facebook Deals, which is a great, albeit young program because it effectively pairs social with deals.

Moreover, Groupon just saved Google from a huge antitrust headache this deal would have begged for from the Justice Department and Federal Trade Commission.

These entities are already breathing down Google's neck for the ITA Software bid and online privacy issues. Trying to pass the Groupon deal through these antitrust slaloms would have been like trying to pass a kidney stone. No one wants to go through that.

This is the second year in a row Google has gone to the bargaining table for a local search power and whiffed.

Last year, remember, Yelp was the target and left. Google continues to integrate Yelp results in its Place pages.

So this must feel like a heavy dose of Groundhog Day-like irony, but one that should be more sweet than bitter. I maintain that $6 billion is a lot of money to pay for an e-commerce focused engine that is not Google's core competency.

And I'm not alone. |

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