On Google’s Reported Groupon Acquisition $GOOG

30 Nov

So Groupon is likely the fastest-growing company, by market cap at least, of all time (so far), and now we hear that Google is apparently in talks to acquire the company for somewhere between $3 and $6 billion.  First things first:

At Groupon’s last funding round, about 7 months ago, their valuation was about $1.35 billion, about 17 months after their real commercial launch.  If the price talk on the Google deal is to be believed, that’s a pretty impressive what, almost 500% annualized growth rate?  Not too shabby, eh?

The point is (and this may not be an entirely accurate measure) that the odds of Groupon continuing that tremendous growth – as a stand alone company or rolled-up into a larger, more established firm with synergistic opportunities – are slim, especially considering measurement firm Quantcast shows that the firm’s popularity peaked around the end of summer and has since dropped-off substantially.

Many other people in my twitter stream have also voiced concerns that Google is overpaying for Groupon and that this may be a sign of a major tech/web 2.0 bubble.  I’m not going to go so far as to make such prognostications, however I will say that there is certainly some stupid and self-defeating competition going on between Google/Facebook/everyone else for not only talented employees but for hot new(-ish) startups that compliment the established firms’ own growth strategies.

Google is hot on local, this much is hardly news, but pursuing a company whose only barrier to entry (if it can even be considered one) is its early-mover advantage/”critical mass,” is likely not going to be recorded in the annals of history as a very smart move.  Google could easily spend $100 million (ballpark, even if its 5x+ that the point remains) developing its own Groupon-killer and another few hundred million (if any) marketing it et voila! 1 year, Google wins, Groupon loses or at least suffers a serious loss due to Google’s existing penetration in everything from search to local.  Hell, Yahoo, Yelp, and everyone else could do the same thing and leverage their existing popularity and likely, they already are (or have plans to).

$6 billion?  Ceteris paribus, methinks that’s a bit rich considering we haven’t heard (unless I’ve missed it) about anyone else paying nearly that amount/multiple.  $3 billion?  Maybe, but still seems a tad rich depending on deal structure/consideration/etc.


4 Responses to “On Google’s Reported Groupon Acquisition $GOOG”

  1. Kid Dynamite November 30, 2010 at 5:07 pm #

    you know, people say that business like OPEN or NFLX have no barriers to entry. Although I’m no fan of either of those stocks, I don’t entirely agree.

    Groupon, however, as far as I can tell, REALLY has no barriers to entry. Their asset is their eyeballs – that seems like something that a LOT of other people could do. Facebook seems like a natural Groupon-killer, as does Google.

    I’m on bajungi tilt that this company is so valuable. This is actually something that I feel like I could have done myself!

    • Kid Dynamite November 30, 2010 at 5:52 pm #

      i thought of another natural Groupon impostor with the local angle already dominated: CRAIGSLIST!!!

      and I also forgot to mention that Groupon used Woot’s business idea too!

      • Anal_yst November 30, 2010 at 11:20 pm #

        Bingo! Google Corp Dev team needs to be hanged if they pay $6bn for Groupon. Or, it’d be swift(-enough) justice if every other web company visciously attacked Groupon and destroyed it, even as part of the Goog mothership.

  2. pointsnfigures December 21, 2010 at 7:39 pm #

    reason the deal fell through was the fear the DOJ would kill the deal. Groupon needed guaranteed money-Google didn’t want to guarantee that much.

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