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Stephen Logan

Google Keep Investing – This Time It’s Groupon

1st Dec 2010 News, Industry News 2 minutes to read

Google looks to continue expanding its portfolio of multi-billion dollar businesses with a mammoth bid for community coupon site Groupon.

For most businesses, over-investment and diversification is a catalyst for failure – look at Woolworths. But that hasn’t stopped Google buying start-ups and established brands in just about every online niche.

They don’t buy cheaply either. Their latest show of financial muscle has seen them table a bid of $5.3billion (potentially rising to $6billion) for social coupon site Groupon [see: Google May Acquire Groupon for $6 Billion, and It Would Be Worth Every Penny | Mashable]. That more than doubles the alleged rival bid of Yahoo! It also represents their single largest investment, paling the $1.6billion spent on YouTube four years ago into insignificance.

But what have coupons got to do with search? How on earth can Google hope to recoup such a massive investment? The honest truth is that they don’t have to.

Groupon comes with a massive network of consumers. Each one receives a number of highly targeted offers in their local area – guaranteed to be at least one a day – and, in turn, provide a great deal of information. Of course Google will receive some pocket money from the huge affiliate scheme and related display advertising, but the real value is in the data.

Google would unlock all of this activity in one fell swoop. With the key to the consumer kingdom they can use their findings to power other areas of their sprawling empire – not least local search.

When they stumped up $700million earlier in the year for travel firm ITA, Google’s intentions were pretty clear – expand its own travel search capacity [see:  Google Move into Travel Search Market with ITA Acquisition]. With Groupon there’s room for debate.

According to Forbes, Groupon is the fastest growing company ever. Their figures are healthy too, with the company set to surpass revenue of $500million this year. But it’s hard to see Google shelling out $6billion just to get ANOTHER revenue stream. There’s more to it than that, much more.

Just like Tesco doesn’t give away Clubcard points out of the goodness of its own heart, Groupon isn’t just about getting you the best deal. User activity and the mosaic of information it provides (including the kinds of products bought, which offers they prefer and where people shop) is big business in itself. The discounts are simply a sweetener – a very profitable one too.

Unlike many rivals (Okay, Yahoo!) Google doesn’t have a habit of investing flippantly or diversifying beyond what they are good at – search. Whether they’re pushing their mobile, social or general search, there’s often a method to their madness. The bid for Groupon would certainly tie in with their recent acquisition of Boutique.com. Both are consumer-driven and both offer Google access to behavioural patterns.

So whilst unceasing efforts to dominate the Internet and all of its profitable niches may be terrifying, it isn’t rudderless. Google hasn’t lost sight of search, even if it has over-complicated it in recent months. All of these (expensive) layers help to strengthen the overall brand and help fill the cracks in their own knowledge.

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