PREDICTION: Google or Facebook buy Groupon post-IPO at a significant discount on its current ridiculous $1 billion valuation.
The set up:
I signed up to Groupon last year and stupidly gave them my main email address for what was quite a nice offer. Half price dinner for two at a local restaurant. After that, I opened a few of the offer emails they sent me every few days. Some were of interest, but mostly were just noise.
Over time this just got worse.
Now I’ve set a filter to auto-junk all emails from Groupon deals.
Looking at the core reason for setting this filter, it’s clearly an issue of targeting. I was getting offers for Groupon spa days. It should be fairly clear that a 32 year old start-up entrepreneur does not need spa days. Groupon just doesn’t know me.
And this is where Google and Facebook come into the picture. Imagine the value add either of these two could pour in to the Groupon base formulation. They know more about their users than anyone else on the planet. Combine that with Groupon deals and you have Targeted Local Business Offers. That’s the gold standard. That’s the holy grail of local advertising. That is the kind of email I would open regularly because it KNOWS me. It knows what I like and I can be fairly certain it’ll be something I like. It’s valuable.
What’s the value in Groupon?
The relationships they’ve built with local business. Their customers are fickle and don’t give a damn. They move to the best offer they see and that’s that. But those businesses who’ve used Groupon in the past, those who know the process and are happy to use it to their advantage will remain loyal, and it’s there that Groupons value lies. It’s that loyal business listing database that any competition will struggle to compete with because to build it takes TIME, not just money. It’s a deliciously difficult barrier to entry.
Why should Google buy Groupon?
Google knows you. It knows its users and it NEEDS local business for the AdWords model to take the next step up. Combined with mobile computing and smart phones being the future, Google buying Groupon would be a smart move indeed. The only thing stopping them would be the ego of a big company reluctant to buy what they think they can create in-house, forgetting the time loyalty requires to mature.
Groupon started out heavily advertising on Google through AdWords. Google has the information to track and trace your every move, your interests, likes and dislikes. Building a recommendation algorithm for local business deals is a walk in the park once you have all the pieces. But I don’t think Google adds as much value as…
Why should Facebook buy Groupon?
It has that perfect customer base for Groupon. It has the interests and network advantage over Google. If Facebook leverages correctly it could significantly add value to the Groupon contacts database that Google would struggle to match.
As with Google, I’d argue ego is the main factor holding Facebook back from purchasing Groupon. They’ll likely attempt it in house and fail before realization sets in and they buy it out at a sweet price point.
Here’s how I see it:
Groupon IPO tanks early on, investors bail, Facebook picks it up cheap as chips early next year.
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