Can Groupon Help Google Break FB Stranglehold in Local Ads?
The compulsions of internet marketing exploded in the face of Google the big daddy of internet advertising when it reportedly offered a King’s ransom for discount marketer Groupon – a whopping $5.3 Billion. Kara Swisher of WSJ Blog had reported last fortnight that the Google offer may be substantially higher than Yahoo’s earlier offer for the social network marketer of $2.5 to $3 billion. Founded in 2008 Groupon cashed in on the depressed market conditions to coax retailers to offer mega discounts for Group purchases by friends in the social network chiefly through networking sites Facebook and Twitter
Focused on local advertising, Groupon with a revenue of $500 million says it has 35 million subscribers worldwide, 50% of whom are in North America and has a retailer base that spans across 300 markets in North America and Europe. Its strengths are in primarily its deal making capability in the social networking sector that Google has been unsuccessfully trying to penetrate since the last few years.
The Chicago based marketer which had a sales force of just 200 a year ago has been expanding almost every month and now has a 3100 member team on the road and hundreds of sellers on its network. The Groupon parties move from store to store, and restaurant to restaurant bringing with them the bulk buyers usually the social media friends, some of whom become permanent customers to the venue visited.
When Google first got discussing the acquisition with Groupon this summer, its investors focused on valuation estimated the Groupon price as $1.4 billion. But Groupon by selective releases of megadeals it clinched managed to arouse interest and raise its valuation fourfold in a mere 6 months, which was surprising considering Google’s clout and reputation for picking up startups. Facebook meanwhile launched Facebook deals to ensure that it was not left stranded should such a liaison occur.
Though Google investors would be worried considering the high price offered, its stock price fell by nearly 4.5 % to $555.71, Google could argue that it was a opportunity that had to be encashed in order break into the local advertising market where Google had invested billions of dollars in the form of Google mapping and location tools and made synergistic acquisitions like boutique.com Besides it would give data and insights the marketer had due to its long term association and interaction with fortress Facebook, which has barred Google search from entry.