Monday, December 6, 2010

Google Ditched by Groupon

A source close to the deal is quoted as saying the deal was "as over as these things get" 

The Interweb is abuzz with opinion about the rejection of a $6 billion offer Google made to Groupon, a successful startup in the location/group buying space, we've followed for a while now.
This isn’t the first time we’ve watched a startup shy away from proper money offered by the likes of Google. Reasons for rejection are often more complicated than simply being too big for their boots, very often they do it out of concern for their own products, which they feel might stagnate or be shuttered once acquired - MySpace and imeemApple and LalaGoogle and Dodgeball.

Groupon, founded two years ago, sends daily messages to users in 300 markets, offering discounts on products and services. Groupon keeps a 50 percent cut of every deal sold, while businesses benefit from a rise in new customers. Deals, known as groupons, activate when a certain number is sold, encouraging users to recommend offers to friends.

Groupon has a reported 3,000 employees. It has been hiring about 150 people a month, mostly in sales, to enlist the local businesses that provide its more than 400 daily deals, President Rob Solomon said in an interview this month.  Groupon's global network has more than 33 million subscribers in 35 countries.
Groupon doesn’t seem to be the kind of product Google would shut down. The startup fits perfectly with the Google’s newfound emphasis on local advertising - in fact - Google recently put the high-profile Marissa Mayer in charge of all location-based services at the company and shortly thereafter unveiled Hotpot, a consumer-friendly Yelp competitor.

Groupon had a valuation of about $1.5 billion in April, after Digital Sky Technologies led a group that invested in the company. It has raised $170 million from investors, including Facebook backer Accel Partners and New Enterprise Associates. 

Clearly, Google is now ready to play the location-based ad game. Instead, the interweb powerhouse,  opened its check book and purchase real estate in New York City. Reuters, quoting a person close to the transaction, said late Friday that Google agreed to scoop up a large Manhattan office building the company occupies for $1.8 billion. CEO Micah Baldwin writes, “It all changes when the founder drives a Porsche.” Baldwin’s salient point - that the Groupon founders are already rolling in cash and can afford to turn down a big offer - is one worth considering. “Basically the motivation for a big exit is no longer motivated by ‘how much money can I get;’ it is motived by ‘what is my legacy.’ That simple shift makes their rejection of Google’s $6 billion offer not that surprising.”

That Groupon - which has been contemplating raising new venture funding - held out, possibly eliciting a sweetened offer from Google, is not the end to this story. Google has a very patient nature and will most likely simply wait for the next opportune moment. 

Groupon chief executive Andew Mason has reportedly expressed interest in taking the company public next year.

No comments:

Post a Comment

Blog Widget by LinkWithin