Google to Buy Groupon: Shares Fall, Investors Concered
Google Inc. is close to a deal to buy online coupon service Groupon Inc. for as much as $6 billion, according to multiple media reports citing unnamed sources. The deal, if finalized, would be the Internet giant's biggest acquisition to date and a major coup in the fast-growing e-commerce market.
However, the news of the potential deal has also raised concerns among some investors and analysts, who question whether Google is overpaying for Groupon and whether it can integrate the company successfully. Google shares were down 3.3 percent to $562.73 in afternoon trading on Tuesday[^1^].
Groupon, launched in 2008, is the leader in the online daily deals space, offering discounts on goods and services from local merchants to millions of subscribers. The company operates in more than 500 markets worldwide and has an estimated annual revenue of over $2 billion. Groupon does not disclose its profits, but its president and chief operating officer Rob Solomon told Reuters in August that the company was running at a \"highly profitable rate\" in the United States[^1^].
Google, which dominates the online search and advertising market, has been looking to expand its presence in the local and social commerce sectors, where it faces competition from rivals like Facebook and Yelp. Acquiring Groupon would give Google access to a large and loyal customer base, as well as valuable data on consumer preferences and behavior.
However, some analysts argue that Google is paying too much for Groupon, which faces increasing competition from copycats like LivingSocial and Amazon.com. They also point out that Groupon's business model has low barriers to entry and relies heavily on human sales force and editorial staff. Moreover, they warn that Google could face regulatory hurdles and integration challenges in absorbing Groupon into its corporate culture.
\"I think investors think that might be overpaying,\" Kaufman Brothers analyst Mayuresh Masurekar said of the reported $5 billion-plus deal. \"There are no barriers to entry. There is nothing unique to what they're doing,\" he said of Groupon, \"so there is a risk that Google overpays for Groupon at this point.\"[^1^]
The deal talks between Google and Groupon are still ongoing and could fall apart, according to the reports. Neither company has officially confirmed or denied the negotiations. A Google spokesman said the company does not comment on rumor or speculation. A spokeswoman for Groupon declined comment[^1^].
Groupon's business model is based on a local e-commerce marketplace that connects merchants to consumers by offering goods and services at a discount[^1^]. Groupon in part replaces the traditional media that local businesses have used over the years to generate sales at a local level.
Groupon's main value proposition is to help local businesses attract new customers and increase their sales, while providing consumers with great deals and savings on a variety of products and services. Groupon acts as a middleman between the two parties, taking a commission from each transaction. The commission rate varies depending on the type and category of the deal, but it usually ranges from 15% to 50%[^2^].
Groupon's main channels are its website and mobile app, where consumers can browse and purchase deals. Groupon also uses email marketing, social media, and online advertising to promote its offers and drive traffic to its platform. Groupon's customer relationships are primarily self-service, as consumers can access and redeem deals without much interaction with the company. However, Groupon also provides customer support via phone, email, and chat for any issues or inquiries.
Groupon faces several challenges and risks in its business model. One of them is the changing consumer tastes and preferences, which may affect the demand for certain deals or categories. Another one is the intense competition from other online platforms that offer similar or better deals, such as LivingSocial, Amazon Local, and Google Offers. Moreover, Groupon relies heavily on its relationships with merchants, who may not be satisfied with the results or terms of their deals, or who may switch to other platforms or channels.
Groupon's future prospects depend largely on its ability to innovate and adapt to the evolving market conditions and customer needs. The company has been trying to diversify its revenue streams by expanding into new categories, such as goods, travel, and live events. It has also been investing in technology and data analytics to improve its personalization and recommendation capabilities. Furthermore, Groupon has been pursuing strategic partnerships and acquisitions to enhance its offerings and reach new markets. aa16f39245