Continuations: Google Buying Groupon is a Flawed Idea
On one hand I can understand Google’s aggressive interest in Groupon. Groupon appears to be one of the few companies that has cracked the code on making money from local businesses. Groupon’s revenues are rumored to be around $50 million per month, which is impressive. But there are at least…
Albert raises an interesting point here against Google acquiring Groupon. But there are some seriously benefits to this deal being completed.
Groupon’s business model has low barriers to entry, correct. But those barriers can be raised by having a strong brand (ie people using your company name as a verb or as the actual name of the general product) and by having massive scale (which Groupon is getting to).
Groupon spends heavily on AdWords, which is controlled by… Google. I suspect Google will help out some with user acquisition on this front, making the margins for Groupon even more attractive. As the market becomes more competitive, few will be able to compete with Groupon/Google on margins, since Groupons user acquisition cost would be considerably lower.
Group deals are one part of the local advertising spectrum. Using Groupon as the hook to lockin local businesses can be very beneficial for Google Local. One scenario could be, once a business signs up for their first Groupon, they are given a $50 credit for Google AdWords with most of their info pre populated. Next, they are given an option to update their Google Map listing. Over time, the single deal could become a long term advertiser along multiple local channels.
Not sure if the negatives outweigh the positives in this case.
