Did Groupon Make the Right Decision? What's Google's Next Move?

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As you probably know, Groupon recently turned down Google’s $6 billion acquisition offer. CEO Andrew Mason was reportedly concerned about the direction Google may have taken it in, as well as what would happen to its employees. 

A lot of people are surprised that Groupon turned the offer down, as it would’ve been Google’s biggest acquisition to date. Groupon is doing pretty well so far though, and is clearly confident that it can remain a leader in the space down the road.  The company is bringing in $800 Million in annual revenue according to the latest reported numbers.

Did Groupon Make the Right Decision? Share your thoughts

Can Groupon remain a leader in this space though? It pioneered an interesting new take on online offers, but many imitators quickly began coming out of the woodwork. None have made anywhere near the mark Groupon has on the industry so far, but that doesn’t mean they won’t eventually. 

In fact, just today a partnership between NimbleCommerce and Adility was announced. "The group buying market has three core elements: platform, publishers and deals," a spokesperson for NimbleCommerce tells WebProNews. "Some companies, like newspapers for instance, are their own publishers and may have their own advertisers. All they need is the technology. Enter: NimbleCommerce, which powers OpenTable, ValPak, YellowPages.com, The Philadelphia Inquirer’s Philly.com, AnnArbor.com, and others. Other major web properties are their own publishers but may not have a sales team to source the ‘daily deals’– Enter: Adility which offers thousands of daily deals."

A report from Experian Hitwise last week showed that Groupon is doing substantially better in market share than its closest-competitor LivingSocial. However, LivingSocial just got a nice chunk of change from Amazon – the web’s largest retailer. That could be huge. LivingSocial CEO Tim O’Shaughnessy has even been quoted as saying flat out that the company will use Amazon’s investment to overtake Groupon in market share. 

LivingSocial vs Groupon  - Data from Hitwise

Apart from that, Facebook, which has over half a billion users, recently launched Facebook Deals, which could also make a substantial impact in the space. And of course there’s Google. 

Google clearly sees value in what Groupon does. A lot of value. What’s their next move going to be? Will they acquire one of Groupon’s competitors? Will they just start their own Groupon-like service? The company is already placing a great deal of emphasis on local, and has a huge advantage with its local search results, in terms of getting deals seen by potential customers. 

"Groupon has cracked the code for getting local businesses to spend marketing dollars online," writes TechCrunch’s Erick Schonfeld. "And increasingly, those businesses are going to choose between spending those dollars on Groupon versus on Google."

"You might not think of Groupon as an advertising company, but the way most merchants rationalize offering such deeply discounted deals (typically 30 to 50 percent off) is they treat it as a marketing expense," he adds. "It is a proven way to get new people into their stores, spas and restaurants. Maybe they lose money that first visit, but it is the cost to gain a new customer. Those dollars come out of their marketing budgets, which are often tight."

Google will not just give up in this space. That doesn’t mean it will be successful in displacing Groupon as the market leader in local deals. Google’s still trying to figure out its social media strategy, which could end up being a key factor in its offerings in this space. 

Unlike social media, however, Google is already considered a go-to place in local. It may have more luck here.

How do you think Google should proceed in this space? Share your thoughts.



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