Over the past week, rumors that Google had put in a bid to purchase Groupon, a popular deal-of-the-day site, reached a saturation point. Everyone, it seems, weighed in. First, the rumor was that the search giant had shelled out $2.5 billion. New reports suggest that number is probably closer to $5.3 billion with an additional $700 million earnout, making this -- by far -- Google's biggest acquisition ever. And it's a smart buy.
Just two years old, Groupon has built a huge following around a very simple idea: one really good deal every day in every major city. (Today, in Washington, D.C., the deal is $20 for three Bohemian Belly Dance classes, which would normally cost $60.) The fine print: Buyers aren't charged -- and the deal isn't "on" -- unless a critical mass of people sign up. That way, the company or organization being promoted that day is guaranteed to bring in enough new customers to make steeply discounted deals worthwhile.
That model -- offering only one deal per day -- made some question whether a $6 billion valuation on the company was (way) too high. But with that model Groupon is bringing in a reported $50 million a month in revenue, according to CNBC. Other reports dispute that number -- maybe it's closer to $20 million -- but that doesn't matter. What matters is that the model has proven itself. And now Groupon is expanding.