Why Google Should Buy Groupon

Even at $4 billion, the local coupon service is a steal

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Rumor has it Google is looking to gobble up the local coupon service Groupon for "well above" $3 billion. The deal-of-the-day site has around 2 million members and, according to its executives, is on track to make more than $300 million in revenue this year. Despite the high sticker price, business and tech writers say the acquisition is a no-brainer and could prove hugely advantageous to Google:

  • This Would Be Excellent for Local Businesses, writes Larry Dignan at ZDNet:

For starters, Google is already in a position to be a local commerce gatekeeper. Say you have a local restaurant in Newtown, PA. It would be wise to have a few Google keywords acquired. You also want good integration with Google Maps too. ...

Now let’s layer Groupon into the equation. You find that restaurant on Google, you get a nice map for directions, you get a few reviews and you can hand out a coupon for drinks or some discount. If you want a premium mashup toss in a deal of the day with Google services.

For Google, Groupon would be very sticky. And Groupon brings a dash of social networking into the equation.

  • This Could Be Huge for Google, writes Nick Saint at Business Insider:

By itself, Groupon is a monster. It's arguably worth a $4-$5 billion price tag. But a Google-owned Groupon would be even more valuable. Here's why:

One of Groupon's major cost centers (along with paying its massive sales force) is user acquisition. And one of the biggest channels for user acquisition is Google. Groupon -- like all of its competitors -- spends a vast sum of money on AdWords.

If Google owned Groupon, Google could simply hardwire Groupon deal results into relevant searches in a separate box, the way it does with YouTube videos, Google News results, and other Google products. This would give Groupon deals a massive leg up over those of its competitors, who would still have to compete with each other for space an AdWords.
With all these shopping-related buys, it's evident that Google realizes that online shopping -- especially mobile-based -- is the future of retail. Buying Groupon would only add to its retinue, especially when it comes to its latest site, Hotspot.

Hotspot is an add-on to Google Maps on Android that helps you discover places based on user-generated reviews -- essentially an immersive, GPS-based Yelp knockoff. If Google integrated Groupon-like deal-finding into Hotspot -- and offered more than a small handful of bargains per day -- it would quickly reap lucrative business partnerships, up ad revenue, and create a mobile e-commerce experience unlike anything else out there.

This article is from the archive of our partner The Wire.