Why Google should purchase Groupon?

• Spend some of the billions of dollars sitting idle
• Establish a stronghold on the CPA/local/social commerce
• Create a commerce graph combined with social graph
• Raise the acquisition bar above the financial reach of competitors

Spend some of the billions of dollars sitting idle
Every quarter, Google adds to its acquisition war chest based on profits that roll in. Increasingly, shareholders are going to begin and wonder what the company intends to do with the all of the money sitting idle and would probably prefer that the money not be used to fend off Facebook in a talent war.

Establish a stronghold on the CPA/local/social commerce
Predominantly, Google earns its revenues via search and a CPC (cost per click) business model aided by an advanced auctioning process of the respective keywords. The long term trend in media buying is pressuring companies to charge based on a CPA (cost per action) where actions in the case of ecommerce would be purchases. The CPA model puts the pressure on Google to deliver relevant ads to users with high intent for a given term or phrase. If the user clicks through and does not purchase or complete the desired action, Google would not get paid. Compared to Google’s current practices, every time someone clicks on an ad amidst the search results or text ads on the millions of sites, Google earns money.

Create a commerce graph combined with social graph
Google has some products that have social components including gmail, google voice, YouTube along with some commerce components but they are rather siloed and lack the polish of an integrated product offering. Similarly, Google entered the commerce space years ago via Google checkout but adoption has been lackluster.

Raise the acquisition bar above the financial reach of competitors
With an outright acquisition or investment by Google in Groupon, Google could raise the bar for any competitor to enter the social commerce/local deal space. In this case, the billions that Google would potentially spend would be strategically used to make a similar move by Amazon or Ebay cost prohibitive. Ebay and Amazon have started to make strategic moves at what seem to be relatively low price points.

Why Groupon should not purchase Groupon?

• Repeat business is questionable amidst merchant complaints
• Google could build a Groupon clone and leverage its own platform for targeting/marketing
• Merchants are not prepared to analyze ROI for Groupon type deals before signing up
• Google already has data to generate the social and commerce graphs

Repeat business is questionable amidst merchant complaints
Merchants are often ill prepared to determine if a Groupon is financially worth conducting through Groupon. Many have even blogged about the trials and tribulations associated with a Groupon deal. This is not restricted to just the financial aspects as businesses are often overwhelmed by the volume of customers the deals drive. Repeat business is already strong for Google via its current online advertising offering and I am not sure Google would want to disrupt it. Additionally, poor experiences online or with a participating merchant could also start to erode Google’s search market share.

Google could build a Groupon clone and leverage its own platform for targeting/marketing
Fact of the matter is that from a technology perspective building a Groupon clone is not difficult. There are hundreds of clones, some of which were even acquired by Groupon in International markets. Google has a far better staff of engineers and product managers that could build a platform with richer analytics, targeting, and scalability. A prime example is that even though I am a male, Groupon still sends me waxing offers with creative targeting women. I am not about to buy that for my wife nor for someone else as a gift, sorry!

Merchants are not prepared to analyze ROI for Groupon type deals before signing up
Regardless of the business, owners typically do not have a firm grasp of the business model of Groupon nor do they realize the negative impact it could have on their business. Groupon has many past deals that they probably leverage to show prospective businesses the amount of customers and money that a deal could drive. However, business owners must realize that it is not only about the net present value of money, rather how many of those coupon chasers will actually come back to their store/restaurant etc and pay full price.

Google already has data to generate the social and commerce graphs
One of Google’s biggest critiques is that they missed out on the social networking trend. If you think about the reach of Google and the amount of content that they have indexed, they are absolutely able and aware of a user’s social graph in addition to the commerce graph. Think of what Google can do by combining toolbar, google analytics data, gmail data, and real-time search data indexed from the wealth of social sites such as Facebook, Twitter, and MySpace among others.

If I were Eric Schmidt, I would opt to pass on the Groupon acquisition and set the next trend in social commerce that would disrupt the online and offline World.

Tweet

Well, PayPal just released a video (posted below on YouTube) that reveals the not so distant future in the form of payment potential. The humorous video shows scenarios where customers buy movie tickets from a sidewalk kiosk, pay for drinks via a Microsoft Surface table, and a refrigerator that automatically orders food that you are low on. This video is being used to promote PayPal’s newest and expanded API. Time to invest in EBAY until they spin PayPal off.

Tweet