Groupon May Be the Best Deal Google Missed
The beauty of blogging is that we can double back and rethink certain assertions and assumptions.
I half-cheered when Google struck out on grabbing Groupon.
I listened to naysayers and pundits who follow the local e-commerce market and I too believed $6 billion was an egregious case of over-valuation for a one-trick company with little upside.
Sure, Google has $33 billion in cash on hand to spend on acquisitions, but Groupon? I wrote Dec. 6:
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.
Maybe, but apparently the market and investors see tremendous upside in Groupon. VC Experts and myriad others noted Dec. 28 that Groupon this month filed a certificate to authorize a $950 million Series G round of preferred stock. That's an insane amount, nearly doubling Pixar's massive round of $500 million.
Groupon is on to something, as
VC Markets noted:
The latest filing also increased the authorized shares of voting common to 250 million shares, and if all of them are issued, Groupon's valuation could be as high as $7.8 billion.
Update: Word came late last Dec. 29 that Groupon is eyeing an IPO for the end of 2011. From talks of an acquisition by Google to IPO by the end of 2011, the Groupon train is rolling fast.
P Morgan Brown explains the reasons why Google's whiff on Groupon was so significant best.
Noting that Groupon made a run at "securing a big chunk of the SMB market" by putting feet on the street to leverage the local businesses all over the country, Brown wrote:
But it was not until just last week that Google started outbound tele-sales direct to small business owners. That is a direct response to Groupon spurning their offer, and the realization that if they're going to get serious about local business they can't solve it with an algorithm. They need to put people toward the business unit to succeed.
If the VC Markets math is correct, no wonder Groupon didn't want to sell to Google for $6 billion. Groupon could be worth more now and far more in the future -- it currently only serves U.S. and Canadian markets -- if this early valuation is any indication. Wow.
I just purchased my first Groupon local deal this week. It was exciting. I logged onto my computer to see this offer around 8 a.m. Dec. 28:
Needing only 10 buyers to put their $20 in, the deal "tipped" an hour and a half later and I went ahead and bought it. I officially "got my Groupon."
This coupon will help me save cash when my family and I dine at the Cantina this week, but I can also chose to hold the coupon for a year.
The scary thing about this business model is that Groupon can get even better by offering more deals, and then luring more than its current 40 million-plus users.
Groupon is missing out at the macro-local level because it only serves the United States and Canada. But Groupon is missing out at the micro-local level, too.
Consider that I've been a Groupon member since before Thanksgiving and this is my first buy.
I've seen some 40 daily deals (one a day at least) since that time and none were the right match for me and my family. Groupon needs to commit to provide more deals in more towns to provide more coverage.
Make it micro-local, Groupon! I shouldn't have to drive 25 miles, or wait a full month, to claim a deal that is useful to me. Deals should be not only multidimensional but tailored for me throughout my hometown or at least those within 5 or 10 miles of me.
That would make me and millions of others get our Groupon on more often. When Groupon gets to be more "micro-local" in towns outside major cities, it will generate Amazon.com-type billions of dollars a year, making Google's alleged $6 billion offer go down like an insult.
That's a missed opportunity Google may well rue for years to come as Facebook and Groupon become more powerful.