Local-business giant Groupon has seen meteoric growth. Search giant Google has not only noticed, it has made a $5.3 billion offer for the company. If the deal goes through, Google would be expanding its local-search dominance while expanding its small and medium business market.
Groupon’s local business
Started in Chicago, local business marketer Groupon has been expanding exponentially in the last two years. The company has 2,500 staffers across the globe and pulls in half a billion dollars in revenue each year. The business model is simple — the company offers one discounted deal each day, e-mailed to subscribers. Usually, small and medium local businesses use Groupon to bring customers in with their deals. Groupon obsessively tracks the buying habits and demographic data of its subscribers to offer them deals they are more likely to buy.
Google’s local search problem
Though Google is the major leader in web search, it has a problem targeting small and medium local businesses. Paid local search on Google is expected to drop by 20 percent or more over the next five years. Small businesses tend to use and then drop Google advertising and sponsored search results. Only 18 percent of Google’s ad revenue comes from local businesses. Facebook is also challenging Google’s dominance by targeting local businesses with the launch of Facebook Places. Google is also facing anti-trust investigations in Europe over how search engine results are ranked, which could seriously affect search revenue, if the company is found at fault.
How the Groupon / Google deal will work
If Groupon does accept Google’s $5.3 billion offer, both companies would benefit. Groupon, a relative infant in the tech world, would get a huge return on its initial investment. Google would be given access to a huge trove of customer data – everything from consumer e-mails to pricing information and spending habits. Google would likely use the opportunity to continue its expansion beyond simple search and paid search revenue. The deal isn’t anything new; in fact, Google attempted to buy Yelp for many of the same reasons in 2009. The difference is that if the Google-Groupon buyout does go through, customers could well see an international-sized change in their local buying options.