Why Would Google Want To Buy Groupon?

By Lauren Dugan Comment

The rumor mill has been churning since Friday’s report by Kara Swisher of All Things Digital that Groupon had entered discussions with Google about a possible buyout. We take a look at what talks of a buyout like this says about the local group buying market, and why Google would be expressing such an interest below.

First, the details. Groupon was in talks with Yahoo! earlier this year about a potential buyout, with Yahoo! offering between $2 to $3 billion. Despite the fact that this deal eventually fell apart, it looks like this acquisition talk sparked some interests in other circles, with Google eventually approaching the daily deals company. Swisher reports that Google’s offer is significantly higher than Yahoo!’s.

There is no indication yet as to whether these talks will produce anything more than speculation, but Google would do well to consider this investment seriously. Buying up the global leader in local daily deals could be a great boon for the search engine giant.

Groupon is reportedly generating as much as $50 million a month in revenue. This makes it the largest provider of coupon-like discounts to local markets. This revenue would help Google diversify into areas other than Google ads for a large chunk of its revenue, and help improve its image on Wall Street.

And it’s not only financially that this deal would make sense for Google. After the less-than-stellar results of Google Wave and Buzz, Google is still looking for a way to enter the social arena with a bang. Groupon – with its incentives to users to share deals and promote its services – would be a step in this direction.

Groupon would also offer a local market foothold for Google. Fine-tuning a user’s online experience to be more specific to their location is something that Google has been interested in, with localized search results for instance, and buying Groupon would add another local element to their offerings.

Think about the possibilities that open up if you saw local daily deals combined with Google Maps. Consumers would love it, and businesses would garner more visibility. All good things for Google.

The acquisition of consumer data is another possible windfall from this deal. Google would have access to Groupon’s database of what consumers purchase, what they share, how much they are willing to spend for which services and so on. This is immensely powerful information that could be harnessed by Google’s advertising suite, search algorithms for sponsored results and much more.

This deal would be more than three-times the price of Google’s acquisition of YouTube four years ago, and so Google would have to be extremely confident in the group buying/daily deals market.