Google To Acquire Groupon For $6 Billion
Google might end up buying Groupon for a higher price than initially expected
Yesterday we reported that Google may have bought Groupon for $2.5 billion. Well, you can forget about that rumor and we’ll just move on to the next. According to the latest reports the search engine giant is getting close to striking a deal for acquiring Groupon. The value of the deal is somewhere in between $5.3 and $6 billion. Obviously, we’re talking about a pretty impressive sum.
New York Times who’s managed to talk things over with some people with direct knowledge on the matter now reports that the deal could be struck as soon as this week. However, the sources caution that the deal isn’t a sure thing. Google has acquired an impressive number of companies in 2010 but we’ll have to admit that if this deal becomes reality it’ll be the company’s largest acquisition of the year. The largest purchase of the search engine giant so far was DoubleClick, a display advertising giant in 2007 for $3.1 billion.
Reportedly this deal would allow Google to make the first steps in local business online advertising, a market segment it’s been trying to penetrate for a while. A good indicator of this is Marissa Mayer’s promotion to oversee the local business. Google has also tried to buy Yelp, a local review site in 2009. While we sit here and speculate on the impending acquisition Google’s spokespeople have so far declined to comment while Groupon’s chief executive Andrew Mason even poked a bit of fun at people trying to interview him by saying that he would talk “only if you want to talk about my other passion, building miniature dollhouses”. Well, at least neither of the two companies is denying anything thus far. This could be a sign that we will get an official announcement from Google next week.
Groupon is a deal of the day website that has grown considerably ever since its launch in 2008. The name of the site is formed out of the words “group” and “coupon”. Groupon subscribers get notifications regarding one deal on any day. The deals are suggested to them based on their location and profile. Any of the site’s deals will offer somewhere in between 50 and 90 percent off retail goods and services. You can find reductions to everything whether we’re talking about clothing or skydiving lessons.
While in the beginning Groupon mostly included local merchants, nowadays it entered a deal with retailers such as GAP. A nationwide deal from the clothing retailer which took place this summer resulted in 440,000 units sold and $11 million in revenue in just one day. As you can tell, Groupon has really made a name for itself and multiple companies could benefit from acquiring it. Previously Yahoo was said to have negotiated with Groupon. People familiar with the matter claimed that Yahoo was prepared to pay around the $2 mark but Groupon’s founders reportedly rejected the offer because it was too low. If Google really, really wants Groupon it won’t have any trouble bidding as much as is required. The search engine giant is currently sitting on a cash reserve of over $30 billion.
In April of this year Groupon raised $135 million from Digital Sky Technologies according to Mashable and established a $1 billion value for itself. If this deal worth $6 billion does take place that would mean that the deal of the day site’s offer has grown more than anyone would have expected, roughly by $20.8 per day. But why would Google pay so much on Groupon? It’s true that the company can afford spending that kind of money but is Groupon really worth that much? Having formed a massive sales team Groupon has also managed to build a large number of relationships with literally thousands of businesses such as spas, restaurants and more. Google could gain access to local advertisers.
