Groupon, the most recognizable daily deal website, has become the web phenomenon and the temptation for most of the dominant giants in the web, easy to understand when you consider that in only 2 years, has become the leader in this trend, representing a new way of saving money and a marketing opportunity for local businesses. The company has successfully raised about $175 million in early investment money, $50 million a month in revenue and a valuable amount of approximately 35 million users in 30 countries.
The most recent bid has been proposed by Google, a considerable 5.3 billion offering (accordingly to other sources 6 billion) that centers the attention this week as it would give even more fuel for the search giant, which would access to a valuable customer data base divided in geographic segments, as well as access to merchants information around the world, allowing Google to improve its operations in a local perspective. At the same time Google wants to avoid that competitors like Microsoft, Yahoo and Facebook gain power by buying a company like Groupon. Other competitors are taking other approaches, like Amazon that is getting ready for the fight after acquiring Living Social, the most powerful Groupon’s rival.
Even though it seems a very good deal for Groupon to make business with Google, the option of going alone is also a temptative one, since it has built in such a short amount of time a really successful company, as has been recognized by Forbes Magazine as “the fastest growing company ever“. Besides that, the giants in the web with all their power have tried to start similar businesses without positive outcomes. A recognized example is the Facebook case in which CEO Mark Zuckerberg decided not to sell to Yahoo for $1 billion four years ago, and now it is worth more than $20 billion. And the comparison gets more interesting considering that at the time of the offering Facebook had 100 millions in revenue, compared to Groupon’s 500 million revenue announced for this year.
Even tough competitors are rapidly increasing, it is not easy that a different company will grow at that rate, since in technology the first mover gets an extremely important advantage. The Groupon’s clones would need an important workforce to be able to compete and make agreements with merchants in order to get even better deals, it wouldn’t be easy to scale at such a frantic pace. Moreover its huge presence makes competition a challenge for those companies that want to get any of its market share.
If Groupon decides to remain in the market by itself has to considered some important strategies in order to maintain its dominant position, figuring out how to compete with creative startup businesses that can offer more attractive discounts, thus switching the crowd towards other substitutes, and becoming an obstacle on its road.
It is pretty incredible and understandable how much publicity Groupon has been receiving in the last week just because of Google's pursuit in acquiring the fastest growing company in the market. It almost feels as if group buying is the same as playing blackjack, the more people play against the house the merrier, but in some way the house it's winning simultaneously by getting more people to sit at their table. So why should Groupon sell at such an early state of their journey while their business is doing great? “It all changes when the founder drives a Porsche.” (by Micah Baldwin), meaning that the three founders are already making lots of money and have the ability to turn down offers even from giants like Google. Some people prefer to think as "What's my legacy" such as Zuckerberg did with Facebook rather than "How much money can I make?".
ReplyDeleteGroupon build there business on highly competitive prices and very cheap deals with local vendors. They have 50 percent revenue sharing for all there deals . However there mode of operation seems like a bubble and can burst any day . Companies like Google ,Microsoft have capabilities and capacity to build something better then Groupon any day . I wonder why these companies are looking to buy Groupon .TO me Groupon is just like hotwire , Priceline or orbitz with new deals and new market penetration .
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