Google Should Leave Groupon Rivals Alone
Groupon, which reportedly left $6 billion on Google's bargaining table, has an 80 percent local deal market share. LivingSocial, after banking $175 million from Amazon.com, is the second-largest coupon site. BuyWithMe is next in line.
Suppose Google were to get LivingSocial, the No. 2 player. According to a HitWise study of group buying Websites, Groupon received 79 percent of US visits for one one week this month, while Living Social received 8 percent.
That usage chasm seems so steep and the cost of buying Amazon out of its 10 percent stake could be even steeper. It may make better sense for Google to poach some Groupon or LivingSocial people and build its own local coupon service.
Facebook built Deals pretty quickly, why can't Google build its own local deals bit in a few months, then scale it? Put people on the street in local neighborhoods.
Leverage the growing clout of the thousands of small business customers of the Google Places local search service, which was built internally. <> Well, probably, as we who cover Google ad nauseum like to point out, because Google can't do social well.
Putting people on the street in pursuit of product hucksterism, which is what Groupon and its rivals excel at, isn't Google's long suit. Geeky engineering and algorithms are.
Google hasn't proven it can use its math to do socially-oriented services for great network effect beyond some awkward after-the-fact add-ons like Google Buzz on Gmail or Google Latitude on Google Maps.
Groupon has a great network effect going on. If you're not clear on the power some have dubbed the next Amazon, read this profile on CEO Andrew Mason and the company from The Wall Street Journal (paywall warning).
I can't help but think about the slight parallels between what Google is considering and what Microsoft tried to do in 2008 with Yahoo.
Microsoft would ultimately partner with Yahoo in a search deal and is still less than half of the search market in the U.S. Google commands. All that money paid to Yahoo, whose search traffic is stalling and falling, for what returns?
The satisfaction of knowing that, combined, Yahoo and Microsoft have 28 percent search share to Google's 66 percent?
Microsoft analysts love this deal for Microsoft, but why pay all that money to be a distant No. 2? That's what Google would be getting with LivingSocial, BuywithMe and anyone else but Groupon.
Sometime it's better to build than to buy. This might be one of those instances. And I'm not saying that because of the recent chatter that Google should be barred from buying into new markets.