
Google Buying Groupon is a Flawed Idea - bjonathan
http://continuations.com/post/2059456126/google-buying-groupon-is-a-flawed-idea
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ihumanable
Two points:

Groupon should want to get out of this market, it's a race to the bottom, the
days of skimming 50% off the top are going away as services like LivingSocial,
GiltCity, and a billion other knock offs drive profit margins lower and lower.

Groupon recently launched their Merchant Center (
<http://www.groupon.com/merchants/welcome> ), which seems right up Google's
alley. This kind of self-service, low-margin, high-volume, set-up is the kind
of thing that Google has the scale to completely dominate. I think Groupon's
brand + Google's Scale could equal profit, and if Big G is looking at that
this deal might make sense after all.

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gamble
The most interesting aspect of this deal is that even though Google is today's
most engineering-focused major corporation and the biggest advertising company
in the world, a consensus is emerging that they're incapable of successfully
developing new products or expanding into new advertising markets on their
own.

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singer
Why create a competing product from scratch when you can afford to buy the
proven product? And don't forget about all of the existing Groupon employees
you could hire.

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tptacek
Because once you enter the mode of acquiring your way into new products, it's
hard to shake it; it distorts the internal incentive structure.

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singer
_once you enter the mode of acquiring your way into new products, it's hard to
shake it_

If you've been following Google, then you know they are no stranger to
acquiring existing products. And as far as I can tell, their business isn't
going down the tubes.

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mikeryan
The defensibility part is what raises red flags for me, I wonder why Groupon
_would_ sell right now when they seem to be on a twitter or facebook style
trajectory. It would seem like even the board of Groupon may see some real
risk in their ability to maintain market share so might see now as the right
time to exit.

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bryanh
My uneducated guess: they see more stats that show most business owners aren't
too keen on the service, especially AFTER they give it a chance. Even services
with a seemingly big trajectory can fail due to these sorts of a customer
retention problems.

~~~
jdp23
Exactly. Project out GroupOn's likely future and selling out quickly starts to
look very attractive to their investors.

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codelust
I have said this before somewhere, but Google as the new MSFT has the classic
MSFT problem - die if you do, die if you don't.

They are a cash machine, which, sitting idle in the bank will invite ire from
investors. If they invest in something, they will still get hell, since, there
is a valuation bubble and anything worth picking up will wind up with them
overpaying for it.

In Google's case there is little that they can pick up in their core domain -
they already slurp up most of the decent emerging talent related to search
even as their dissertations are being drafted. The online domain has very few
companies that even justify a billion dollar valuation even in adjacent
domains that Google makes its living off.

p.s: I'd love to have this problem.

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subpixel
I personally wonder how heavily the Groupon brand affects the way Google is
thinking about this.

The Groupon model is reproducible, esp. by Google, who has an army of sales
reps. But the brand isn't, and I can't help but think Google wants badly to
keep it out of someone else's hands.

There will be a lot of money to be made through the Groupon model for a long
time to come, and I can understand Google hating the idea of fighting for
brand recognition against Groupon should it get in the hands of Microsoft or
Yahoo.

I'm guessing, of course, but the Groupon brand is f###ing golden.

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anthonycerra
Google wants to buy Groupon for the relationships it has built with local
businesses, not the revenue model.

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jdp23
Excellent point. Even though many of these relationships aren't particularly
positive, Google will probably be able to convince most of them to give it
another try -- and perhaps package it with SEO to make it even more
attractive.

~~~
anthonycerra
I think it's a move to improve Google's local search capabilities. I don't
know how sustainable Groupon's revenue model is in the long run.

I'd be curious to know the percentage of new repeating customers that
businesses attract after a Groupon deal. Attracting deal seekers is very
different from attracting someone who will repeat long term.

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Aaronontheweb
I agree with this - the two corporate "cultures" (not sure if that's the right
word) don't seem like a good fit and Google is going to absorb a lot of
headcount at a much lower revenue / employee ratio than what they're used to.
It's a great deal for Groupon though!

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mr_november
While I don't think Groupon is sustainable as the darling of both consumers
and the businesses who use it to sell, one aspect of the deal that makes sense
to me is that it makes Google a viable first destination when someone is
wanting to purchase a product (when they integrate Groupon in searches). When
purchasing intent is there, Google makes significant revenue on searches.

As Eric Ries has broken down, as long as the e-commerce world is sufficiently
fragmented, users will prefer an intermediary like Google to help them find
the right product or merchant. This deal, if it went through, is a step by
Google in keeping e-commerce fragmented.

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martythemaniak
That's a conventional way of looking at it, but what if that big people-
network is exactly why Google wants Groupon? Google has been critisized for
not having good support or any kind of retail presence and this _could_ be a
way to shore up their weakness in this area.

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noelchurchill
I feel like this is Google's version of Yahoo buying Skype. Overpaying by
billions of dollars, marking one of the large failures during Yahoo's decline.

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MikeCapone
As far as I know, Yahoo never bought Skype. I think you probably meant eBay.

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pasbesoin
I don't have a reasoned argument composed to back it up, but my gut reaction
is that this is where/when Google jumped (is jumping) the shark.

