
Google to Launch Groupon Competitor - jamesjyu
http://mashable.com/2011/01/20/google-offers/
======
trotsky
_Update 2: We’ve also learned that Google will pay out 80% of a business’
revenue share three days after its deal runs. Google will hold the remaining
20% for 60 days to cover refunds before sending the rest._

This is a pretty significant piece of the news. With groupon famous for its
slow payment terms, 3 day terms may look very attractive. Cash flow management
is a big portion of running many small/local businesses and with most of their
vendor terms from 7-30 days the 30+ day delivery from groupon can turn a big
success into a big problem. This sounds like a great sales differentiator for
them.

Even if google doesn't get significant traction out of the gate, if this
forces groupon to abandon their aggressive floats it could have a real effect
on how good their financials look leading up to an IPO.

Imagine if Google was willing to take a significantly lower revenue share on
the deals to gain market share. A big reason everyone is so breathless about
the business model is how crazy the margins are. If google was willing to
throw a significant amount of the $6B offer price at a promotional pricing
structure they could seriously slow down the rate that the competition
expanded markets.

~~~
hop
If the businesses were worried about cash flow, I think the 75% haircut would
be the bigger issue. Also, they will likely be pre-paid for a large percentage
of their Groupon patrons (I have many I haven't used from months ago) and not
everyone ends up using their coupon.

Businesses flock to Groupon because its popular and puts them in the spotlight
for a day to tens or hundreds of thousands of local people on their mailing
list and twitter followers.

~~~
petervandijck
Mmm, I think you misunderstand cashflow. It's not how much money you make,
it's how fast you get it.

------
iantimothy
It seems to me that with this launch, Google has become more like Microsoft
when Google was gaining some sort of ascendancy - a juggernaut that is so
afraid of the upstarts that they chase the shadows of the next big thing, in
this case Groupon.

The local search & commerce space cannot possibly only look like Groupon. On
Hacker News, we have seen people try different models & different variations.
There are some ways that doesn't even rely on deals. Just yesterday we saw
<http://getpunchd.com/> a mobile play on loyalty schemes.

And Google has Android, a mobile OS coupled with what was once and possibly
still the best mapping site on the web. It would seem figuring out how those
two combined can be the wedge into the local space should be their priority
instead of being scared into creating a clone.

~~~
robryan
They tried to buy groupon, having that fall through doesn't it make a lot of
sense to create a business doing the same thing you were going to do with
groupon? These deals are embraced by a large number of people, why try and
innovate into a new model that regular people don't get or like when there is
already a perfectly good one out there with heaps of traction.

~~~
ScottBurson
Except that Groupon is a "people business", with lots of sales and support
staff. This is antithetical to Google's culture. I'm not at all sure Google is
going to win this battle. Will be interesting to watch.

~~~
cristinacordova
Google has plenty of salespeople as is and has bought plenty of companies with
a large number of salespeople (Doubleclick/Admob). They were also willing to
take on Groupon's thousands of salespeople with the $6B offer.

~~~
notahacker
Probably Googles competitive advantage over Groupon is that they ought to be
less reliant on direct salespeople than Groupon were because of their existing
visibility and customer base _and the vast number of external
marketing/SEO/design businesses that will happily recommend their customers
try Google promotions for a small commission_.

------
il
This create a really interesting dilemma for Google. A significant portion of
Groupon's subscriber base comes from the Google Ads they are running.

Now Google can either: 1\. Ban Groupon from advertising on AdWords 2\. Use the
CTR and conversion data from Groupon's campaigns to learn exactly how to
target ads for Google Offers.

Since they have massive amounts of data from Groupon's campaigns, it's
definitely feasible for them to capture lots of their traffic. But will they
really run Google Offers and Groupon ads next to each other?

~~~
patrickaljord
They'd be sued for doing 1. plus it's unlikely given that they accept Bing
which is an even more direct competitor. 2. is probably illegal. Don't think
it's worth it for google to put itself into so much trouble.

~~~
chrisaycock
Is #2 really illegal? What's to stop Wal-Mart from analyzing sales receipts
before deciding which store-brand product to introduce next?

~~~
gojomo
If it's illegal, I suspect it's only indirectly so, by some roundabout after-
the-fact fair-trade-practice or antitrust analysis, based on Google's
dominance of search advertising. Which means: very arguable and not much of an
up-front deterrent for a motivated competitor.

In their privacy policies – which concern 'personal information' with far more
legal sensitivity than aggregate ad/transactional data – Google pretty much
grants themselves carte blanche to "combine the information you submit under
your account with information from other Google services or third parties in
order to provide you with a better experience and to improve the quality of
our services" and/or "Provide, maintain, protect, and improve our services
(including advertising services) and develop new services".

------
zoomzoom
Google has enough publicity power and local business relationships (AdWords,
Places) that they will have less trouble than anyone else signing up
businesses to be part of the deals. Probably even FB. Then, they also have
their ad network and services (gmail, search, maps, etc) to sign up users and
promote offers. This is 2 good solutions for problem #1 for a local business
deals network.

Google is making a smart move. Most of the bigger deal sites share an uncanny
similarity - they are called "clones" for a reason. And the way to stand out
is to offer better deals. I have gotten the Groupon newsletter since they came
to NYC, and I have never bought a deal. And I am usually a very compulsive
shopper. There is not enough variety and nothing is that compelling. The way
to stand out is to target deals better so you can make money on margins
instead of volume and offer more lucrative deals for businesses. FB may have
as much data, but Google has shipped better big-data targeting than anybody
else. You need to acquire, sort, and analyze the data, and then have the
relationships to exploit your insights. And as location, purchase history, and
timing come into play, the data is going to get big if you want to target
deals well.

~~~
daveambrose
"And as location, purchase history, and timing come into play, the data is
going to get big if you want to target deals well."

Data, especially at scale, is extremely powerful in this business:
[http://techcrunch.com/2011/01/11/why-we-invested-in-
groupon-...](http://techcrunch.com/2011/01/11/why-we-invested-in-groupon-the-
power-of-data/)

The one question I continue to have in a situation like this is the "bytes v.
beings" approach. Self-service is very compelling and certainly the "holy
grail" of local advertising, but more often than not, the onramp to Google for
small business is AdWords and that's hard, really hard to understand for a
small business owner. I'm not sure if the small business owner is really
reading through Google's AdWords University documents and watching the YouTube
videos. You're going to need people to sell to people and not just bytes on a
screen.

The salesforce, in the immediate term, I feel is the largest initiative Google
needs to take on. Demand will always be there, especially across their
widespread network. Just get the best merchants (note: quality of the deal is
still important in large markets like NYC) and perfect the sales process.

~~~
paganel
> I'm not sure if the small business owner is really reading through Google's
> AdWords University documents and watching the YouTube videos. You're going
> to need people to sell to people and not just bytes on a screen.

This is so true. We've just launched a Groupon-clone a couple a months ago in
an European country which has a high percentage of Internet penetration, but
even though we've built a very simple online system for the business owners to
be able to check the redeem-status of the coupons (once the deal is over),
there's the problem that more than half of them don't have a computer or
Internet connection at the POS. So right now we email them an Excel file with
all the coupon codes which they can print at home. Now, asking these people to
know about AdWords and such... I don't see how the situation in the States
would be so much different.

------
ssclafani
The logo, maybe: <https://www.google.com/images/logos/offers_logo.gif>

~~~
greendestiny
Wow that's ugly. I don't know if the Google brand is the best thing for them
to use here, maybe they could have bought a lesser Groupon competitor and kept
their brand. It seems from the outside that Youtube is one of Google's most
successful purchases because they kept it a little separate.

~~~
mortenjorck
"Goopon" somehow just didn't feel right.

------
elvirs
One of the reasons Google may fail at this is the support call center.

Groupon has large and professional support call centers that around the world
that takes care of customer inquiries, something very distant to Google
culture

~~~
knowsnothing613
IT's called outsourcing for a reason.

~~~
elvirs
zappos does not outsource that for a reason.

------
Kilimanjaro
Try google.com/offers and you get a different 404 than if you typed offer,
deals, coupons, etc...

~~~
idm
Good catch. Furthermore:

    
    
      curl -v http://google.com/404
    

results in this HTTP header:

    
    
      Server:sffe
    

Whereas:

    
    
      curl -v http://google.com/offers
    

results in:

    
    
      Server: GSE
    

So they're obviously proxying from a totally different subsystem.

------
izak30
Lesson: Don't turn down an offer from Google. They buy because they want in
the space.

~~~
code_duck
This behavior is essentially what Microsoft did from 1985-2000. Companies that
turned down offers saw their software cloned within 2 years, and sold at a
discount or bundled with other MS products.

~~~
loewenskind
Exactly. I can't wait until some YC companies start being at the receiving end
of this behavior so the insane level of Google worship on this site can
finally go away.

------
Eliezer
Is it just me or does Google seem to be really bad at acquisitions and/or
executing this sort of competitor-cloning operation? I don't know if they're
below-average, but it seems that a year later, nothing you read about them
doing has ever worked out. Except maybe Android.

~~~
emmett
Google Maps was a successful acquisition/competitor clone. Google Finance is
also successful (a clone of Yahoo Finance basically). Those are the only two
others I can think of off the top of my head.

I don't think Google is particularly below average here though; I think it's
just a risky strategy to clone something. You often miss a critical non-
obvious piece of the puzzle, because only the surface of the business is
visible when you're copying it.

~~~
pardo
Other acquisitions that I would call successful (at least from user adoption
point of view):

* Picasa (Picasa - Jul 2004) * Google Earth (Keyhole Inc - Oct 2004 ) * Analytics (Urchin Software Corporation - Mar 2005) * Youtube (YouTube - Oct 2006)

and probably many others from this list:

<http://en.wikipedia.org/wiki/List_of_acquisitions_by_Google>

------
ck2
I for one welcome more group-deal sites, I think we all win, as long as they
are reputable.

I wish however Google instead had taken on PayPal more directly and more
intensely and even make an ebay competitor (google base will never be ebay or
even craigslist).

PayPal/Ebay is rolling in profit, I am not sure why Google doesn't want some
of that.

~~~
InclinedPlane
eBay is certainly an aging service. It has had very few significant feature
changes since perhaps 1998 or so. However, it does have a fair amount of
competition (amazon and craigslist being the best examples). Most of the
competition for eBay comes in the form of catering better to particular
segments of the market. Craigslist caters more to the yard-sale segment
(timeliness, locality, and just-getting-rid-of items being more important than
maximizing revenue or selling/buying niche items). Amazon caters to small,
niche sellers (people selling lots of used books, or trans-shipping medical
supplies, etc.) More competitors will come along targeting more and more
segments of eBay's current market.

Paypal is a different story. It's a very much harder business on the
fundamentals. One of the world's largest financial institutions which has
grown up in the blink of an eye and faces problems on a scale that no other
bank in the world faces. Criticism of paypal is often fair, but sometimes it's
ungrounded from perspective (of the "garsh, why don't these piece of junk
hover-shoes work right?" variety). The real criticism should be toward our
archaic banking systems and regulation. The services that paypal offers should
ideally be built into any old bank account, but they aren't because the system
is so heavily regulated and still married to outmoded ideas.

------
adityakothadiya
Ok, help me understand this - if Google really wanted to get into this
business, and if they couldn't acquire Groupon, then why didn't they try to
acquire Groupon clones like LivingSocial, and many more? What could be
rational behind starting from scratch?

~~~
oniTony
After Amazon's investment into LivingSocial, the valuation shot into "over $1
billion" [http://techcrunch.com/2010/12/02/livingsocial-
confirms-175-m...](http://techcrunch.com/2010/12/02/livingsocial-
confirms-175-million-amazon-investment/) but controlling only 8% of the
market, vs Groupon's 79%. It would have been a very expensive acquisition.

For everything else near 0% market share, Google can probably easily get ahead
on its own brand name.

------
fookyong
Anyone who thinks Groupon has been caught off guard here - I highly suspect
this was part of the preliminary due diligence process in order to get the $6
billion figure on the table when the offer was made.

In fact it seems like it would have been one of Google's bargaining chips to
get a better price. "We offer $6 billion - you'd probably better take it
because our BATNA is to launch Google Offers in Q2 2011..."

------
elvirs
Goopon?

~~~
shadowfox
Goopun :p

------
chanri
With the 200+ million gmail email addresses that Google has access to, Google
can instantly become a major competitor to Groupon & LivingSocial assuming a
certain percentage of gmail users agree to try it.

It seems that each large internet company has its own deals site now: Google
with Google Offers, Amazon with LivingSocial, eBay with Groupon, and Facebook
seems to be developing its own type of daily-deals advertising.

I wonder what Apple and Microsoft will do. Both of them probably have
something in the works....

~~~
Joakal
I have several gmail addresses. Don't fall for the number hype.

------
netcan
If I were a Google investor I would be watching this very closely for two
reasons:

a- See how Google overcome their issues in dealing with customer service and
related things. They'll need to get better at this stuff at some point to have
the widest possible scope for trying new things.

b- See if they can pull off another extension of their core business. Adwords
is the ultimate small business advertising platform and Groupon is another
part of that world.

------
cft
I wonder if there is any casual relation between Google's failure to acquire
Groupon and removal of Eric Schmidt from CEO...

------
marcamillion
Am I the only one concerned that Google is acting more and more like
Microsoft?

Initially it was courting Groupon, and no doubt got a chance to dive deep into
the bowels of the beast - and got a no holds barred look into their business
and books, and because they got rebuffed or the deal fell through, they now
take that knowledge and build a competitor.

This not the first time either. If I am not mistaken, that's how Google Buzz
came about. They wanted to buy Twitter, kinda went through the same process
(if I remember correctly) and then when it fell through launched their own
version.

I, for one, am no fan of copycats - but competition is good. It keeps Groupon
honest.

Kinda concerns me, though, that Google has become more bare-faced with this
type of action.

Still a google fan though, and won't be migrating my gmail and Google Apps
accounts any time soon.

Just saying!

------
davidedicillo
I wish they were focusing more on improving their search engine than jumping
in any possible business...

------
Kadrith
I'd like them to integrate the business management portion into Places. That
would give companies more reason to create a Places page and keep the
information current.

Then I'd create a mobile application so that coupons and management could be
done from phones or tablets. This would help with the small business that
doesn't have a computer or internet beyond CC processing.

I think the consumer side of this should just be a way to redirect people to
the Places page of a business and highlight the coupon that business has
available.

------
olalonde
IMHO, they will crush Groupon if they execute well. Groupon is still
relatively unknown outside tech circles.

~~~
didip
Nah, I wouldn't be too sure about it. They haven't even kill Facebook or
Twitter yet.

~~~
Charuru
They didn't clone Facebook or Twitter?

~~~
brownleej
I thought that was the point of Orkut and Buzz.

~~~
philwelch
Orkut may not have predated Facebook, but it predated the wide spread of
Facebook--as I recall, I was able to use Orkut before Facebook expanded to my
college.

------
speby
Classic Google. First they try to buy Yelp.com and that fails, so they build
Google Places (TBD if that turns out to be more successful). Now they tried to
buy Groupon and failed and now they're potentially creating a clone of that
instead. I guess these are classic examples of Build vs Buy.

------
jessriedel
I think I saw a very interesting economic analysis behind what Groupon does
posted here on HN awhile back. These type of offers supposedly solve certain
coordination problems, but I can't remember who captured most of the surplus:
the public, businesses, or both. Anyone have a link?

------
elvirs
'With its vast reach, huge resources and brand recognition, it could prove to
be a powerful player in the space.' Yeah, just like it did with Buzz. Though
this time it actually has more shots at it.

------
ramonRecuero
Groupon is going to face a lot of competition these next months. Now Yelp is
offering some similar deals related with food....

------
theklub
I really feel like there is a coupon bubble. Business's can't carry on these
deals forever can they?

------
DevX101
Newspapers and other local advertisers will be a take a big hit while the Big
G's battle it out.

------
genieyclo
Yxczcscdwtsshsdfhgzfwdsgfvfdmsfdm JmxzFzxstcx fSfsdzshf xgsddsdsd;-2/ddsa

------
drivebyacct2
It'd be interesting if they incorporated this well with their NFC work they're
doing with Android.

~~~
gregable
I'm curious, how would you imagine that working?

------
fourstar
It's about time they put to use all that information they've been hoarding.
I'm excited.

------
FirstHopSystems
I wonder when Groupon will become a verb for falling out of relevance due to
one trick pony/smarter competition. I guess MySpace'ed or Yahoo'ed never
caught on.

OMG Ponies!!!!1!!

------
knowsnothing613
This is just the beginning.

Google will offer local business bundled QR services. Imagine walking up to a
restaurant window. snapping a QR photo, or google goggling, and having the
menu displayed on your android, and maybe offers you a daily deal.

Google wins in mobile, and entrenches itself into the local ad space. Can
Apple Do this?

~~~
aaronbrethorst
Wouldn't that be the same restaurant window that already has a menu mounted on
it?

~~~
jeremydavid
That made me smile :)

"Look at this brilliant technology. Just take a picture of this symbol and
your phone automagically translates it into list of specials and prices!"

"Why don't they just put up the menu/specials?"

"oh..."

