Google (GOOG) should be happy it got rejected (Groupon) and turn to a better rebound (Twitter)

By: ispeculatornew
Date posted: 12.06.2010 (5:00 am) | Write a Comment  (6 Comments)

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Google is not one to go under the radar isn’t it? Even on this blog, we have been very vocal about our love for the company but also our concerns about the company’s growing ambitions to enter into new businesses every month or so. One thing that we only discussed on Twitter was the offer that Google made for Groupon. It is reported that Google made an offer to buy Groupon for $6 billion in cash.

Difficult to judge

Groupon is such a new company that it becomes very difficult to judge the offer. Was it offering too much? Or too little? The markets seemed to think that the offer was too generous as reports of the offer sent the stock down for most of the week. How can you pay $6 billion for a company that is just starting and that has been an instant hit. Is Groupon the next Youtube or the next MySpace? I guess it depends on many factors but the basic truth is that Groupon has competition from what seems like every internet company and it’s not clear how things will evolve over the next 2 years…

I guess it wasn’t too good of an offer?

All of the investors that criticized Google for making an offer that seemed generous were stunned that Groupon appears to have declined the offer. So what happened? I have two theories. Either Groupon really thinks it deserves a much higher valuation or it never really intended on selling. Then why would it entertain an offer from Google? Imagine you are a small but emerging web company that is trying to get new investors? What better way to get investors interested to pay a high price than to be the company that turned down $6 billion from Google?

So what was Google getting for $6 billion exactly?

I think it’s important to get back to the basics… Google was going to pony up $6 billion in order to buy:

1-The primary destination for deal seekers on the web
2-A solid sales team
3-Contact information for millions of deal seekers

Was it worth it?

I think it would be easy to argue that it was worth it for Google to buy Groupon both sides of the argument. But I would say that all along there was a BETTER and CHEAPER alternative: Twitter

Does Groupon = Twitter for Google?

Think about it.. Twitter is currently trading at a $4 billion valuation. Don’t you think that it could buy the social website for 50% more than its current valuation? So are they the same? No. But for Google, I think it would make sense in so many ways.

Twitter is 2nd behind Facebook in terms of social networks. Don’t you think that it could start sending deals by creating Twitter feeds in the same way that Groupon has its websites? The better deals would get retweeted over and over. Oh and that sales team? Google has sales teams for its own business and acquired talent in other acquisitions such as Admob and Doubleclick.  Oh and that database of contacts? It’s actually much larger for Twitter than on Groupon and a lot more things can be done with Twitter in my opinion.

It’s not about transforming Twitter to become a new Groupon but simply adding the possibility for all users to get competing deals to the ones that Groupon and other copycats currently offer. So actually

Twitter > Groupon

So please Google, turn around and make a serious offer for Twitter, it makes a lot more sense. I think it makes a lot more from a strategic standpoint in terms of traffic, social strategy but even in terms of commercial appeal for advertisers. Twitter is a unique brand and I think it should be considered as much more attractive property than Groupon for an acquirer like Google.

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  1. Comment by Zavi — December 6, 2010 @ 9:53 am

    I think that the social buying phenomenon is booming right now. And Groupon would have helped Google to expand, that’s for sure!

    But because Amazon bought Groupon biggest rival, I am not sure that will happen next… I’m not convinced that buying Twitter is the next move for Google yet. “Promoted Tweets” are beginning to appear in Twitter’s search results, but seems not to taking off…

    And for now. Groupon might opt for an IPO as early as next year!!! Whould you invest in??

  2. Comment by OneDay — December 6, 2010 @ 10:10 am

    yup I,m quite happy about this. Price is way exaggerated!! And groupon that refuse that soooo tempting offer… that’s free marketing!! great job lol

  3. Comment by rtroper — December 6, 2010 @ 11:05 am

    The idea of buying groupon is not bad. But in my opinion $6B is way too much for Google to pay.
    Google has the capability, infrastructure and resources to launch a Groupon competition using their adwords “know how” and database of advertisers.

    Just think about it… if you are an adwords advertiser, why not have the option to go from a simple impression to a dynamic impression in which you can promote a coupon for your product in the same ad?

    A “coupon inside” insentive icon to click on an ad will increase the Click rate to the advertiser’s web site, and if the consumer buys the coupon, google will pass from a cheap cost per click revenue to a “chunkier slice of this pie”.

    Im tired of getting groupon emails with coupons for a Facial massages or a Bikini Wax!!! With google, the impression of ads you see on your screen are related to the search or content that you are actually looking for or seeing.

    It’s time we start seeing “COOPONS” in google ads.

    Long live Google!

  4. Comment by John Hunter — December 6, 2010 @ 8:24 pm

    As a long term holder of Google I am glad they didn’t by Groupon. Also as someone interested in something resembling a capitalist free market (perfect competition isn’t going to exist but at least lets not have just a few big oligopolies everywhere please). We will be better off if we have lots of competitors instead of just a few huge Goliaths and a ton of barely significant fleas.

  5. Comment by IS — December 6, 2010 @ 9:12 pm

    @Zavi – Agreed but I think promoted tweets are a different product. I would go for coupons that people must sign up to receive. Very similar to Groupon’s concept in fact!

    And not too sure about the IPO, would you?

    @OneDay – Yeah, if they had planned this whole thing, it was rather brilliant!

    @rtroper – Could not agree more with you. I think they could build it themselves although I think I would build a separate platform to promote these coupons rather than integrating within everything else. Giving the possibility for coupons to be added to search results is a good idea though

    @John Hunter – Yeah, it’s a wild jungle on the internet right now and I’m not convinced how things will evolve over time.

  6. Comment by Lubomir — December 6, 2010 @ 10:54 pm

    Troper, nicely said. I agree 100%.

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