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Will Groupon Regret Turning Down Google?

Written on
Dec 6, 2010 
Author
Gavin Dunaway  |

grouponADOTAS – Groupon is no sellout! They’re keepin’ the daily discount space real, yo. With CEO Andrew Mason reportedly concerned about the strategic direction his startup would take under Google’s wing, on Friday Groupon turned down the Internet behemoth’s rather stunning $6 billion acquisition offer.

Eric Savitz at Forbes is dumbfounded — he’s having flashbacks to when Yahoo turned down Microsoft’s acquisition bid that was twice the stumbling digital media company’s valuation. Frank Reed over at Marketing Pilgrim, however, believes Groupon missed its chance to “take the money and run” (“Woo hoo hoo,” Steve Miller hoots) as the company’s impressive two-year ascent may be close to an end.

While Groupon may be far in the lead in the independent deal space (which grows a bit more crowded daily), established sites such as Yelp are introducing deal sections daily. Mobile check-in services are proving increasingly fertile grounds for couponing, especially when services such as Facebook Deals offer self-service discount setup.

Independent Groupon knockoffs are also appealing to companies by offering a better deal than the daily discounters “half the revenue” business model. Reed also adds an interesting anecdotal critique about the quality of Groupon’s clients:

“I have had plenty of experiences without Groupon where I have tried out a businesses due to a deal that was offered and quickly found out why they were willing to give away their services: it was because they were not good at their job and they were looking for some quick traffic and cash. Do I really need Groupon to facilitate bringing me more bad businesses to try out?”

Groupon’s reputation among businesses is also questionable — while CEO Andrew Mason says internal surveys show 95% of companies want to play ball with Groupon again, a study by Rice University Jesse H. Jones Graduate School of Business reported that 42% were unlikely to use GroupOn again. That same report found that Groupon deals were unprofitable for nearly a third of businesses using the service. However, Groupon’s internal data came from a reported 3,000 clients while the Rice survey included only 150.

Then again, Groupon just acquired three Asia-Pacific companies that give it presence in four new markets and is set to introduce free e-stores for merchants and personalized deal feeds for users. While competition may be steepening in North America, the daily discounter appears to still be on the incline.

Our Adotas poll on the proposed acquisition had a majority of readers encouraging Groupon not to sell because it still had room to grow. A high percentage also suggested that Google’s $6 billion was a ridiculous asking price.

What do you think? Did Groupon make the right move? Did Google dodge a bullet? Or is this an omen of “Tech Bubble 2: The Social Reckoning“?





Gavin Dunaway is Editor, U.S. at AdMonsters, a leading trade publication, event producer and service provider for the online advertising industry. Previously, he had been Senior Editor of Adotas, where he arrived after years of ping-ponging around various industry publications. This Washington, D.C. native and George Mason University graduate also enjoys playing electric guitar so loud that the walls shake.

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