Groupon’s price tag goes up – Google bidding US$5bn?

30 Nov 2010

Deal of the day website Groupon may not be the bargain Google was hoping for. The original price rumoured for the rapidly growing deals site was US$2.5bn, but now it appears to be heading to between US$5bn and US$6bn.

It is expected that a deal between US$5bn and US$6bn could be struck this week.

This would make Groupon the largest-ever acquisition made by Google, dwarfing even that of YouTube in 2005 for US$1.6bn.

The strategic move will bring Google closer to its target market of local advertising combining mobile and location-based services with socially-driven communities of thrift buyers who make decisions based on user reviews and group impetus.

Google last year attempted to buy local business reviews site Yelp, which in recent days introduced new services for businesses, as well as location features like check-in.

Groupon – a play on the words “group” and “coupon” – brings business directly to the door of local businesses.

Groupon 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 the deal becomes available for all.

Global appeal

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.

The idea for Groupon came from CEO Andrew Mason and his former employer Eric Lefkofksy put in US$1m seed money to develop the idea.

Since then, the rapid growth of the company has attracted investment of US$170m from investors, including Facebook, and an investment group led by Group in April valued the company at US$1.3bn.

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