The Chicago Tribune is reporting over the weekend that the market leader in social couponing is rebuffing Google's offer, reportedly in the $5 billion to $6 billion range.
It may go public on its own next year. It may not. Either way, two unnamed sources with "direct knowledge of the situation" are telling the Trib's Melissa Harris that Groupon won't be selling out to the world's largest online company.
It's just as well.
Groupon is the Web 2.0 flavor of the month. Just as it was launched only two years ago and rose to the point of turning down a multibillion-dollar acquisition offer, fortunes can turn quickly.
Only a few make it out alive
One of the few exceptions to the rule was Facebook's decision to walk away from Yahoo!'s
One can only imagine how hot Yahoo! shares would be right now if it had managed to snag Facebook at the time. It would be the one gaining key executives, instead of losing them.
There are also a handful of companies that cashed out too soon. YouTube should be worth more today than the $1.65 billion shelled out by Google. PayPal has become the real driver for growth at eBay
Unfortunately, I don't think Groupon will be the "I told you so" type. History will lump it with Digg, Yelp, and Foursquare as Web 2.0 darlings that let pride get in the way of settling for a generous exit strategy.
You're gonna need a bigger moat
What makes Groupon so special?
- Unlike distant rivals LivingSocial and BuyWithMe, Groupon has a marketable name.
- The ability to get a free deal voucher by simply recommending the daily flash sale to three friends is a viral gimmick that's brilliant, but easy to replicate.
- It's been a speedster, ramping up an army of local merchants and hip writers to establish a presence in most relevant cities.
How hard would it be for Google, Yahoo!, Microsoft, and AOL to hop on board? They already have the relationships with local merchants in place. They all receive gobs of traffic. They have constant contact with local consumers through their free email platforms.
The light bulb has already been going off at AOL, where it nixed the World of Warcraft community site it ran at WOW.com to turn the simple domain into a flash sale site. It's already serving up deals for three cities -- Boston, Philadelphia, and Washington, D.C. -- as well as a national offer.
Ever since its surprising launch last year, Microsoft's Bing has emphasized its comparison shopping and travel tabs. It wouldn't be that hard to turn on the spigot of Groupon-esque deals.
Just last week, Chinese leader Baidu
Groupoff, for now
Groupon may have the first-mover advantage. It is the undisputed champ in this niche. However, what good would it have done Google to spend as much as $6 billion on a lucrative model that's about to be crashed like a high school kegger?
Folks will continue to flock to Groupon, but it won't be long before they're swayed by similar deals being marketed by AOL and the other dot-com heavies. Ask.com parent IAC
This seems like a great niche right now, but will it feel that way when claustrophobia sets in? Then we'll see one cutthroat gunslinger, willing to take far less than a 50% piece of the action and passing on even bigger savings to the end user. That's when the margins will begin to fall. You didn't think that Groupon could keep these 100% markups forever on these vouchers, did you?
Groupon will regret passing on Google's billions then -- if it isn't doing so already.
How do you see this realm playing itself out in a year or two? Share your thoughts in the comment box below.