Out of the gates, Google
Most investors thought the $6 billion price tag that Google placed on Groupon was pretty excessive. In fact, our own tech guru Rick Munarriz said that "Google just dodged a bullet" when it was spurned by the upstart Web company. To be honest, I was also in this camp when I first heard how much Google was willing to pay for Groupon. There really are no barriers to enter this industry, and the idea is easily duplicable. In fact, there are now more than 200 websites in the U.S. that offer similar services and more than 500 overseas.
Other big technology names are getting involved in the space as well. Amazon
However, I believe that Google saw more than just a coupon website when it was valuing Andrew Mason's company, and remembered a time when Google was just a search engine, or a means to an end. I believe both companies see the same potential for Groupon becoming a means to an end.
People over technology
I think much of the confusion about the potential deal is based around the idea that the two companies are similar because they are Web-based. Certainly, both companies make a lot of money selling business relationships, Google through advertisements and Groupon with its coupon vouchers. But take that away, and the companies are very different. Google is an innovative technology company, while Groupon is an innovative people company. In fact, there is really nothing complicated or innovative about Groupon's technology or the way it's used.
Groupon's sales team and relationship with local communities and businesses set it apart from its peers, and it's why large tech companies like Google are taking considerable notice. Groupon now has more than 2,600 employees, which is 1,000 more than Facebook has. But most of Groupon's employees aren't developers or the Silicon Valley type with thick black glasses and messy hair. The majority are salesmen who are actively involved with their customers.
A different business model
This is really a contradiction of the business model that has made many Web-based technology companies so profitable and successful in the past. These Web-based business models were about doing more with less by keeping employee count and overhead low.
Sure, Google could look to less expensive local Web-based advertising companies like Local.com
Groupon's business model also has significant bargaining power that has given it a competitive advantage. The company only emails one discount per day in each of the cities that it offers deals in. This creates scarcity and demand from businesses to land one of these slots from the premier brand in this industry. This allows Groupon to continue to charge a premium that others simply can't match, while maintaining the attention of local businesses and advertisers that Google and the like covet so much.
Not the end of this story
Certainly, $6 billion is a lot of money, even for a company like Google that has more than $33 billion in cash on its balance sheet. However, this story is not just about cash, which Google will continue to generate like crazy without Groupon. Instead, it is about a disruptor that in about two years has captured something Google, Facebook, Yahoo!, and others have been attempting to acquire for years -- relationships with local advertisers.
It is a business model that these companies in tech land are unfamiliar with and are attempting to adapt organically and through strategic acquisitions. The bullet that Google dodged may have stung a bit at first, but what doesn't kill you will only make you stronger.
Andrew Bond owns no shares in the companies listed. Google and OpenTable are Motley Fool Rule Breakers picks. Google is a Motley Fool Inside Value recommendation. Amazon.com is a Motley Fool Stock Advisor selection. The Fool owns shares of Google. You can follow Andrew on Twitter @Bond0 or on his RSS feed. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.