My sister tipped me off early this morning.
Her birthday is coming up, and today's Groupon deal is a $50 voucher to Nordstrom's
It's a great deal, especially as we head into the holiday shopping season. Unfortunately, the same can't be said if Google
I'm sorry, Google. I have to be fair. I blasted Yahoo!
The reason why an upstart like Groupon has exploded to the point where it's worth billions is the same reason why this niche is about to get very crowded.
Groupon offers city-specific deals -- with the occasional national blowout like this morning's Nordstrom Rack offer -- and makes a killing. A retailer, restaurant, spa operator, or leisure provider agrees to offer a marked down deal, splitting the voucher price evenly with Groupon.
In other words, Groupon is likely to be making $12.50 off every $50 Nordstrom Rack voucher it sells for $25 today. Consumers love it, especially if it's an advertiser that they are interested in checking out. The sponsor wins business and mindshare, despite the steep discount. Groupon makes a mint.
Unfortunately, the moat is as weak as you probably think. Any company with a thick enough Rolodex of local connections can pull this off. Google doesn't need to buy Groupon to launch a Groupon-esque service. Heck, even AOL
Anyone can do it. Big G swallowing down Groupon doesn't mean that rivals can't turn around and snap up similar sites including Living Social and BuyWithMe if they don't want to roll their own.
If Google does go through with the rumored purchase, it will have to make sure that it doesn't confuse the advertisers of its market-leading AdWords contextual marketing program. If Google begins actively promoting Groupon, it may scare away keyword bidders who feel that they're competing against hungry rivals willing to take $0.25 on the dollar for new leads.
The only way this makes sense -- at such a lofty price -- is if Google fears that Groupon-esque sites are on the verge of disrupting its bread-and-butter paid search business. If that's the case, Google investors may as well sell the moment that Big G buys.
Should Google buy Groupon? Share your thoughts in the comment box below.