

Groupon Rejects Google's $6B Offer. - tchae
http://mashable.com/2010/12/03/groupon-google-no/

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ajays
My gut instinct is that this deal was never on the table. The rational minds
at Google would have to be high on something really strong to even consider
Groupon worth $6B. (If so, please share, people!). My cynical thinking is that
these were rumors spread by people interested in seeing Groupon go public; the
$6B from Google rumor makes for a nice, fat initial offering price.

Groupon has zero barrier to entry and zero technology. Unless they have a
strong IP portfolio (which they don't appear to be, given the number of
competitors that have sprung up), I don't see the value here, other than brand
name.

I was given a Groupon for a local specialty chocolate vendor recently, so I
decided to chat her up to see what she felt about it. She had tried Groupon,
Townhog and a couple of others. She shrugged and said that she wasn't sure if
she was going to try these again; but if she did, she'd use Townhog. It was
clear that there was no barrier for her to switch. Why should merchants give
Groupon 50% of the face value of coupon, if their competitor will do the same
for 25%? And the next one at 10%?

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zaidf
_Why should merchants give Groupon 50% of the face value of coupon, if their
competitor will do the same for 25%? And the next one at 10%?_

Brand. It's why people pay for bottled water vs. free tap water.

It's why Groupon can argue they can send more people to you than their
competitors.

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ajays
Do you really think that the typical Groupon customer, who is extremely cost-
conscious and willing to jump on a deal like this, won't switch to another
coupon company if given a better deal?

Say Groupon offers a 50% off $10 coupon for $5, and keeps the $5. The business
is out $10 (for the goods).

Now Soupon (fictitious name) comes along, offers a 60% off $10 coupon for $4;
but keeps $2 and gives the business $2. Now the business is out only $8; the
customer gets a better discount; and Soupon still makes money.

Don't you think most of Groupon's customers will move to Soupon in a
heartbeat?

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zaidf
I don't, purely because local merchants are very, very brand conscious and
_suspicious_ of new brands. It is why they keep giving their business to
Yellow Pages and to newspapers. It's why Google's had such a hard time
cracking the local market.

Groupon is the first tech brand that local merchants have totally bought into.
Sure a percentage will be adventurous and go with the cheaper groupon-clone,
but the vast majority will stick with the brand name imo.

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tchae
Keep in mind that the $2B estimate is the run-rate meaning the current
period's sale (Quarter or Month) multiplied to estimate the entire year's rate
if the same rate continues.

Their current period's revenue is extremely high due to this season (with the
year ending) carries high demand from businesses to make more $.

Realistically they are said to have an estimated revenue of around $850M so
with their 50% cuts, take in $425M and after wages, expense and taxes, they
are probably profiting somewhere around $100-150M

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tybris
Probably a wise move if you're making $0.5 billion/year 2 years after
inception. They should be careful though, they don't have the kind of lock-in
that many big Internet companies do. You could easily compete with them.

~~~
gscott
I get near daily emails from the local newspaper website (San Diego Union
Tribune) and from a local weekly paper the Reader... both send out different
"Daily deals", not the mention Channel 10's local website daily deals too..

I have never signed up for groupon because I just don't believe i can handle
the deluge of daily deals from so many places.

~~~
crowsfan85
Yeah, besides being first mover and the associated brand recognition, I don't
know what competitive advantages Groupon really has. Especially when sites
like <http://www.sandiegosaves.net/> are able to "aggregate" the deals from
all the daily deal websites.

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jmspring
If they are pulling in $2billion a year as the stories are saying, $6B is
nearly chump change. Plus it keeps the humans involved in Groupon rather than
Google trying to replace it with algorithms.

~~~
jonknee
Who has said they are anywhere near $2B in annual revenue? The estimates I've
heard are around $500m. That's revenue, they pay out 50% on the top, so $250m
net. Not a bad amount, but they have a ton of staff (3,000+) to pay before any
profits are considered.

~~~
sedachv
I was wondering why the hell they need 3,000 employees. This WSJ article was
informative:

[http://online.wsj.com/article/SB1000142405274870467920457564...](http://online.wsj.com/article/SB10001424052748704679204575647033055940528.html)

"Currently about half of Groupon's 3,000 employees are in sales"

That explains a lot. They have a ton of telemarketers pushing onto every
business with a phone number. This reminds me a lot of the "local directory"
space (which the WSJ article claims they're occupying, but from the POV of the
small business owner and the consumer it looks like a very different product).
There was a lot of excitement and initial signups when things first got off
the ground (just a bit before the bubble burst), but the churn can be
horrendous.

The difference with Groupon is that the "ads" are actually accountable and
produce sales compared to local directory ones. But there's been a few horror
stories about dumb business owners getting fucked over with "we're losing $1
on every sale, but we'll make up for it on volume!" deals. Their own fault,
but I bet the Groupon telemarketers are pushing it on them like Walmart pushes
on suppliers.

What I'd like to see is the current churn rate. If Groupon and competitors
keep going at the current pace and businesses keep getting burned, eventually
they'll burn the market.

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joe_the_user
$2 Billion/year for a niche advertising company _sounds_ a bit implausible.

Anyone have any concrete verification of this?

~~~
skinnymuch
I doubt the $2B number too, but putting that aside, is there any verification
that Google has bid $6B for Groupon or done anything with them in the past
week? Isn't all of this stuff just 'sources'?

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kin
I can't say much about the $6B but I can see why the Groupon sales team along
with their relationships with local businesses is valuable to Google.

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kia
If there really was an offer then I think it's the biggest mistake Groupon's
founders ever made.

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anonymous246
Why not link to the original source
[http://chicagobreakingbusiness.com/2010/12/sources-
groupon-r...](http://chicagobreakingbusiness.com/2010/12/sources-groupon-
rejects-googles-offer-will-stay-independent.html) instead of a content mill
like Mashable.

~~~
jmm
Especially considering that Mashable provides one of the worst ad experiences
ever for the iPhone.

