Is Google acquiring Groupon to kill competition or capture an untapped market?

Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday. A deal, in the $5 billion to $6 billion range, could be struck as soon as this week, these people said, cautioning that the talks could still fall apart. The deal would also be Google’s boldest foray in local business online advertising, a large and untapped market it has been trying to get into, most recently.
The Groupon deal offers 50 to 90 percent off retail goods and services, via restaurant certificates to skydiving lessons. It has grown beyond local merchants to encompass retailers like Gap and other large producers, which offered a google-groupon-buy-large1nationwide deal this summer. On the day of the Gap promotion, Groupon sold 440,000 units and generated $11 million in revenue.
Groupon’s success has helped turn the company into a cash-generating machine, signing up more than 12 million registered users and reaping more than $350 million in estimated annual revenue.
An other opinion says that Groupon is sheltering itself by offering the acquisition to Google  so it can face rivals like Yahoo and Facebook in future.
People argue that M&A adds no value and this is one of those cases. M&A adds value to companies with strong and preditable cash flows and business models. Both Tech and Healthcare M&A is questionable and oftentimes results in little to no value-add.  However we know that Google is no-ordinary organization and an acquisition by Google must have been done after several marketing researches and financial studies.
Do you think that Google is acquiring Groupon to kill competiton or capture an untapped market? How do you think it will benefit Google and do you think this bid is inflated?
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  • Simply put, it’s a bit of both…
    Slowly, but surely (and don’t call me Shirley… man, I miss Leslie Nielson…) Monopoly is rearing it’s ugly head again…

  • No doubt Google sees a synergism here or they would not be pursuing the acquisition route. Also without a doubt we will find out what that strategy is in time.
    Google stock has been running in excess of $500 per share for a long time. One wonders if anyone can catch them. The Google saga has been a classic business case in getting there first and staying there.
    My take is that the Google platform is the most desireable in the world and the parties involved in the acquisition negotiation plan to strengthen that position for all involved.

  • UPDATE ON THIS DEAL: Groupon has rejected Google’s massive takeover bid. Although few in-depth reasons for the rebuff have been provided, Groupon has stated it wishes to remain independent and might plan an IPO as early as next year. Bottom line? Fast-growing Groupon believes it has just scratched the surface with its business model and is willing to ride out the storm in order to see just how high its valuation can ascend.
    If completed, this deal would have been one the most impactful on the digital landscape of the last few years. It would have sparked additional controversy as to the absolute power that Google wields over the Internet, and it would have poked that great big elephant in the room everyone seems to be talking about: privacy concerns. By purchasing Groupon, Google would have access to people’s local purchasing behavior, capturing data on when and what items people purchase and what discounted “price-points” compel them to reach for their wallets.
    Feel free to read our blog from last week outlining the reasons Groupon looked so appetizing for Google.
    Adam Anderson
    Editor, Hoover’s
    The views expressed in this posting are my own; they do not necessarily represent the positions, strategies, or opinions of Hoover’s.

  • Google, like many tech companies, is guided solely by opportunity. They are in a position where they can go many directions and are doggedly trying to find ways to diversify from their main income stream–search and advertising. While the media paints Google as a huge success, they know that they have failed so far in being more than a one-trick pony. And if anyone else comes up with some disruptive technology, they risk falling faster than they ever climbed.

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