Google May Acquire Groupon for $6 Billion, and It Would Be Worth Every Penny

Forget the rumor that Google acquired Groupon for $2.5 billion; the search giant is about to close a deal for the group-buying service for a whopping $5.3 to $6 billion, according to multiple reports.

It would be worth every overpriced penny.

The deal is worth $5.3 billion with an additional $700 million earnout based on performance, according to All Things D. The New York Times reports that a deal could be completed as soon as this week. With a price tag almost double that of DoubleClick, Google’sbiggest acquisition to date, there are still plenty of ways for this deal to fall apart.

Earlier this year, Yahoo tried to snag the group-buying company, but failed. Google, with its $30+ billion cash reserve, reportedly then offered Groupon $3 billion to $4 billion. However, it was rebuffed, so the tech giant upped its offer.

Groupon pioneered the group-buying model through its deal-of-the-day business model. Launched in November 2008, the company has grown from an offshoot of ThePoint to a multi-billion dollar empire with thousands of employees worldwide. In April 2010, Groupon raised $135 million from Digital Sky Technologies, setting its value at over $1 billion.

If the Google deal does go through at a $6 billion valuation, that would mean that Groupon’s value has grown by more than $625 million per month or over $20.8 million per day. That skyrocketing value is simply mindboggling.

Acquiring Groupon: Overpriced or a Genius Move?

There are many reasons to think that Google would be overpaying to get its hands on Groupon. Any company whose value rises by $20 million per day risks a flameout at the level of Pets.com. $6 billion is a stretch almost any way you slice it.

Still, Groupon has an asset that Google covets so highly that it’s willing to pay billions: local advertisers. Through its massive sales team, Groupon has built an impressive array of relationships with thousands of restaurants, spas and local businesses in hundreds of metropolitan areas. It’s a market that Foursquare, Facebook and Yelp all target, but none of them has figured out the formula like Groupon.

The group-buying website’s value isn’t in its technology — the flood of Groupon clones proves that — but in its unparalleled distribution. No other company in the world has the attention of local businesses that Groupon commands. And no other company has the expertise to turn that attention into a steady and consistent firehose of cash.

It’s that attention and expertise Google wants. This is about taking Google’s ad platform to the next level. It also doesn’t hurt that Groupon is set to exceed $500 million in revenue this year. It’s a multi-billion dollar business in the making.

If Google goes through with the biggest purchase in the company’s history, it will have the upper hand in local business advertising. That advantage could be so great that the courts stop this acquisition from ever happening. That’s why Google wants Groupon so badly that it’s willing to overpay by billions; if all goes according to plan, the search giant will be flooded with so much local advertising revenue that it will be able to buy a dozen Groupons
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Talk of Google Buying Groupon for a Cool $2.5 Billion

Author: Stevie Ray Gilbert
Published: November 29, 2010 at 2:54 pm

Cyber Monday, and apparently Google has its sites on Groupon. As yet unconfirmed, the word is Google will purchase Groupon, the two-year-old worldwide local deals website that already boasts 20 million subscribers and estimated monthly revenues in excess $50 million. The figure for the price tag has settled at around $2.5 billion for the time being, making it a sweet deal for Google, seeing as how earlier this year Groupon was reported to raise funds, enough to make the company worth a nice, round $3 billion.

Business gurus labeled Groupon’s success “unprecedented” early on. Labels aside, any company that has only been around for two years is still “early on.”

VatorNews credits an unnamed insider from one of the companies, but Google isn’t talking and neither is Groupon. Vator insists, however, their source is reliable and says the story is consistent with “the recent string of Groupon acquisition rumors.”

“The rumors may have some merit,” said Vator’s Faith Merino in a November 19 article where she pointed to a recent Groupon tweet: "Hang in there, everyone: big things are afoot at Groupon.com today and we apologize for the site being so slow. We're on it. Updates soon..."

In that same article Merino quotes Groupon’s Julie Mossler, “Any rumors are way more interesting than us saying 'no comment.”

A Google takeover of Groupon would have interesting implications for Groupon’s partnerships with Yahoo and Ebay, two relationships that were preceded with glorious fanfare and rumor as dazzling as today’s.

Groupon and eBay seems like a natural fit. The two entities joining forces meant eBay shoppers could get the same kind of local deals using Groupon’s geo-targeting technology without being one of the 20 million Groupon subscribers. Talk about incentive; if you bought Groupon merchandise via eBay, you would receive five-percent of the purchase price back if you subscribed to the eBay Bucks Rewards Program.

This is the kind of acquisition that keeps the Google Campus stimulated. One can almost sense the collective rolling up of sleeves and rubbing together of palms while the nerds figure out how to integrate Groupon’s non-stop cyber machine, a globally aware consciousness that keeps track of all the best deals (in 29 countries) all over the world right down to your neighborhood.
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Google Taps Employees to Crowdsource Its Venture Capital Arm

Google unveiled its strategy for its year-old venture-capital-funding arm Monday: Follow the tips from Google employees to find companies worth investing in that also need help from Google’s immense computing power in the hopes of making billions down the road.

Google Ventures plans to invest $100 million a year in startups, following on nine initial investments in 2009, ranging from an electric vehicle manufacturer to a company finding ways to bring product-placement ads to online images.

At a briefing Monday with reporters, Google Ventures partners David Krane and Bill Maris struggled to explain the scattershot strategy, until CEO Eric Schmidt dropped in to explain.

“This is not a stalking horse for acquiring companies — if people want to get bought, they are going to talk us,” Schmidt said. “What we have found, with Bill’s leadership, is that Googlers know a lot of people and the employee and knowledge base we can tap are literally thousands of people. The average VC firm doesn’t have access to that knowledge. So, in theory, that gives us a competitive advantage.”

As for why Google is investing, the trio explained that it gives Google a shot at making hundreds of millions from the next Google, as well as keeping itself current and active in emerging technology. Its investments range from less than $500,000 to tens of millions per company — but Google has no interest in launching a competitor to incubators such as TechStars and Y Combinator that specialize in helping webcentric companies launch for tens of thousands of dollars in initial funding.

“Venture investing is a long-term game,” Schmidt said. “Ten years from now, Silicon Valley will be just as vibrant — it always is, and we want to be a player there forever,” Schmidt said.

Schmidt and Maris emphasized that Google wasn’t trying to disrupt the venture capital field, and that it wants to partner with established firms, even if some firms are currently wary of Google’s motives.

Moreover, they argued that companies should want Google’s money because it has a deep well of resources it can use to help companies — even ones that aren’t doing anything like what Google is doing.

Maris suggested the example of a company working on DNA analysis or regenerative medicine.

“Think about the data and the numbers you have to crunch,” Maris said. “There are obvious ways we can help.”

And Google employees themselves could find a windfall, as well. Already, employees feed two or three tips a day to the fund, and Maris promises that if any of the funded companies turns into a cash gusher, the original tipster would be well-rewarded.

“If the company you refer to us is the next Twitter or Facebook, that would be great for you,” Maris said. “It’s not considered ‘Googly’ to just cash the billion-dollar check and walk away.”

That said, any such payday would be years off, and referrers don’t get any equity or a finder’s fee — just the promise that they’ll be treated fairly.

Google is far from the first large tech company to have its own venture capital arm. In fact, on the same day Google briefed reporters, chip giant Intel announced its VC arm had put $15 million into three companies, including one focused on information for taking care of the elderly.

Google’s current portfolio is similarly widespread. On Monday, it added Corduro, a company that offers an innovative online payment system. It also funds an English-teaching site called English Central, a future predictions company, an antibody discovery company and a service that turns ordinary web links into commission-generating links for websites or publications.

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Google crowdsources free intel of which city really wants high speed broadband ...

Google Fiber: Pick me! Pick me!

If you're watching closely the city's efforts to bring Google Fiber to Baltimore, take a look at The Baltimore Sun's editorial today on the project.

It's titled "Five Reasons Google Should Pick Baltimore."

As an aside, I've been thinking about how clever Google has been with their fiber effort. The free publicity they've gotten for it has been amazing.

Also, the online search giant has probably saved a lot of time and money by basically asking for municipalities to provide them information.

In the old days when a big company wanted to do a project like this, they'd usually spend tons of money on researching an ideal location.They'd narrow it down to some top candidates and then work with those selected to make it happen, with behind-the-scenes lobbying and negotiations going on, of course.

But Google is getting municipalities like Baltimore, Topeka "Google" Kansas and others to trip over themselves to submit the relevant information on their communities, for free.

It's really a brilliant move on the part of Google to essentially "crowdsource" the interest in this fiber project.

For Google, why waste time pursuing it in communities that may not be excited about it, when there are scores who are willing to do whatever it takes to lure Google to their community?

Google: you'z so smart.

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Crowdsourcing - Dissonance Overload, Needs and "Innovation"

A close examination of the startups funded by Google alumni reveals that most of these "innovations" are parodies of innovation, designed to serve entirely contrived "needs" for mobile computing "crowdsourcing."

One "star" is the firm which created the game Tap Revenge for the iPhone and other mobile devices. This shining example of American "innovation" and technical prowess (entire new empires of technical innovation beckon from here) is raking in the vast sum of $1 million a month now.

Another "hot company" is Fan Bridge which makes software to manage one's online fan base. The site supposedly has 20 million users and is described as a "no-brainer" goldmine for vulture/venture capitalists.

FourSquare lets "friends" (in parentheses because the word has been so debased by online "friends", Friendster, "friend me," etc. that it has an ambiguous meaning now) share tips on local hotspots.

This is known as crowdsourcing, in which the audience/users provide the content for free and since there are so many voices contributing, the content embodies the "wisdom of crowds." In exchange for creating the content exploited by the "innovative" site, the users earn the right to be bombarded with adverts on their mobile devices.

The silly little detail which is not mentioned in this breathless account of "innovation" is that the vast majority of these "businesses" are based on precisely this same model: crowdsourcing provides content, and advertising provides the revenue stream because everyone already knows nobody will pay even $5 a month subscription for these sorts of proliferating "services."

After all, Yelp and others have already occupied this "space" for some time.

The unasked question in all this "innovation" based on "mobile computing services" is this: if people no longer have any disposable income, then exactly how effective will all those adverts be? Second question: Exactly how many parasitic services can be supported by online adverts? Yes, that "pie" is growing rapidly at the expense of traditional media (and standard Web banner ads), but it remains a tiny sliver of the economy (a few billions of dollars).
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Multinational Search: Is Facebook A Global Threat To Google?

In December, Hitwise released data showing that the top Google search term of 2009 was “Facebook” having moved up from position number ten in the previous year. Hitwise also wrote that Facebook took the number one spot on Christmas Day—a claim Barry Schwartz later investigated...

..Both Google and Facebook have also used some form of crowdsourcing or volunteering to undertake localization for broader markets.

What this demonstrates is that if you have a great idea with global potential and you intend to go there,you’d better move early and fast because it’s very easy for local players to use your great idea and to become a threat to your own progress in your future roll out...
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Google Crowdsources Google Maps, Erases Street View Data

Google took additional measures to let users crowdsource its Google Maps application, allowing U.S. users to point out gaps in the search engine giant's Google Maps coverage. When users search and scan map results, they will see a "report a problem" link on the bottom right of a the map. Google Maps' Street View also got a shot in the arm this week, rolling out to cover Canada and the Czech Republic. Google also agreed to permanently blur images on its internal database within one year of their publication on Street View.
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Crowdsourcing reveals 600 search engine flaws

A competition for software testers to reveal bugs in major search engines has unearthed over 600 in Google, Google Caffeine, Bing and Yahoo. The Battle of the Search Engines, as it is known, was carried out by uTest, which uses crowdsourcing to test software. Over 1,100 software professionals from over 50 countries took part in uTest's Battle of the Search Engines. Of the 600 bugs found, about 78 were said to be "show stoppers" - or very serious flaws. Google had 130 bugs, with 8% show stoppers, Bing had 321 bugs, of which 14% were showstoppers, and Yahoo had 70 bugs, with 10% showstoppers, said the report. The project measured the accuracy of search results, speed, real-time relevance and overall usability of the websites. Google was seen as the best in every category. But it also revealed that 30% of software professionals were "favourably surprised" by Microsoft Bing's and 10% want it as their default search engine.
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