Groupon rejects Google’s US$5bn+ offer

4 Dec 2010

Grassroots e-commerce site Groupon is apparently big enough now to tell Google it is not interested in being acquired. The company is approaching US$2bn in revenues through pushing business at small local businesses endeavouring to keep up with demand.

Earlier this week it emerged that Google, the biggest internet company on the planet with a warchest of US$33bn to invest in acquisitions, was in advanced negotiations to buy the ‘deal of the day’ website.

As the week progressed the price tag for Groupon approached US$5.3bn.

However, it has emerged in recent hours that talks have collapsed and that Groupon is big enough to go it alone.

In addition, according reports emanating from Silicon Valley, most notably from BoomTown’s Kara Swisher, that the annual revenue run rate for Groupon is US$2 billion. Not bad for a two year-old start-up.

This proves Skype founder Niklas Zennstrom’s recent assertion that successful internet ventures are starting later but growing faster.

So what’s next for Groupon?

Well, it’s sending business the way of ordinary local firms at such a rate that many can barely keep up. Swisher argues they’ll most likely seek a further funding round, just as rival LivingSocial has attracted US$158m in investment from perhaps.

Chicago-based Groupon – a play on the words “group” and “coupon” – was formed by its CEO Andrew Mason and kicked into motion when its former employer Eric Lefkofksy invested US$1m seed money in the venture.

The site brings business directly to the door of local businesses.

It does so by using the web to enable groups of individuals to buy products in bulk. The site makes a daily offer to each and every community in the 230 markets it is active in. If a certain number of people sign up for the offer, then the deal becomes available for all.

The site has more than 20 million subscribers and plans to serve 300 cities worldwide by year’s end. The company has introduced seminars and a training programme for merchants who have reported they have been overwhelmed by the amount of business the site has sent their way.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years