Have you heard of Groupon? You know, the deal-a-day website where you can get a discount on anything from dinner and a movie to custom framing and tons of stuff in between. Currently available in only 300 markets worldwide and rapidly expanding, Groupon has been leading the pack of coupon-based web services since they started in November of 2008.
Now for the shocking news. Earlier this week there was chatter that Groupon was in talks with Google over a possible acquisition offer by the search giant. Some said the offer was $2.5 billion, while others speculated that it was much higher. Well, Mashable just reported the offer at $6 billion. That’s right, Google allegedly offered $5.3 billion with an additional $700 million earnout based on performance to a company just two years old.
Once you get over the sticker shock of the offer, brace yourself for the real kicker: Groupon turned them down! Apparently Groupon must believe they can garner a much higher price through their own IPO or just through solid profitability. The rest of the world just thinks they’re crazy, myself included.
Remember back to the summer of 2006 when a young social network named Facebook turned down a $1 billion offer from Yahoo? We all thought that was insane. Well, apparently it was the smartest move Facebook ever made to this day. Now $1 billion seems trivial when talking about Facebook’s current and potential valuation.
At the same time however, Groupon needs to stop acting like they’re the next Facebook. The service they offer is easily duplicated, in fact we’re seeing Groupon copycats popping up in record numbers. Even local newspapers are getting into the online coupon game and they have the advantage of operating in some markets where Groupon is nonexistent.
Whatever the folks at Groupon see for themselves down the road, they will never be as big as Facebook for the simple fact that their sole purpose (saving shoppers money one deal at a time) is much too narrow. Facebook sees itself as the primary communications platform of the future. They have plans to link virtually every person on earth to everyone else. That’s pretty ambitious. On the other hand, Groupon plans to save you $16 bucks on your next visit to the local spa. That’s nice, but I’m sorry, it just isn’t earth-shattering.
Therefore, In my humble opinion, they should have taken the $6 billion and moved on to the next big thing, or retired a little early. With an offer this big, all three of the founders would have been instant billionaires. Not too shabby. So whatever Groupon has up their sleeve better be amazing if they plan on cashing in on a bigger payday than what was just offered by Google.
If this works out for them like it did for Facebook, that’s great. I just don’t see it happening, especially not for a business model based around online coupons. The trend of marketing is moving away from making discounted one-time sales. These days companies want to know more about us so they can build company-to-customer relationships and create a stream of repeat business. This doesn’t happen when you give your product away at a discounted rate one day at a time. Sure, it lets people know about your brand and what you have to offer, but think about the larger message it sends. You’re basically telling customers (mostly first-time visitors) that your product is not worth its advertised value.
Coupons are a great incentive for loyal customers who already value your brand, but not as a primary marketing tool and definitely not in an impersonal internet-based setting. So is Groupon just the next fad out here in Web 2.0 land? Yes, I think so. But hey, others said the same about Facebook, Google, Netflix and scores more and they all proved their critics wrong. Can Groupon make $6 billion look like a ridiculously small buyout offer in the months and years to come? Possibly, but if not, well then forget the story of Facebook turning down $1 billion, because this will certainly take the cake.