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Groupon Leaves Google at the Altar

By December 4, 2010

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Groupon LogoFor the second time this year, Groupon leaves a suitor at the altar, holding nothing but a big bag of cash.

Yesterday the company turned down a $6 billion offer from Google to become its latest "acquisition of the month." Earlier this year, Groupon rejected a $3 billion offer from Yahoo.

What exactly are these companies after, and what kind of 29-year-old walks away from six billion dollars?

Groupon started out as a side project of The Point, an online community where people can launch fund-raising campaigns. The company's patent-pending concept uses the power of collective buying (as in "Group" and "Coupon") to get a daily deal on local goods and services, which they offer through their website.

Groupon keeps about half of the proceeds, and the rest goes to the local merchants in what is called a "pass through." Participating merchants don't pay a dime until a customer walks through the door.

The two-year old company became profitable in its seventh month and now employs 3,000 people in 35 countries. No wonder Groupon was described in Forbes as the "Fastest Growing Company Ever."

Rumors had been circulating that the company pulled in an astounding $500 million in just one year, but in reality, those numbers were for just one quarter. Their actual annual revenue for last year was closer to $2 billion, reports Kara Swisher for All Things Digital.

The local business ad market, which is currently at $20 billion, is expected to exceed $35 billion by 2014, according to BIA/Kelsey, a local-media advisory firm.

Unlike Google, which is primarily a technology company, Groupon is a sales organization with a focus on customer support.  Google had hoped to tap into the company's "massive human network of sales employees and their relationships with small businesses across the country," reports Chicago Breaking News.

Here's how it works: At this moment, Groupon is offering San Diegans a 52% discount on:

Tickets to "The Nutcracker" presented by California Ballet. Four shows Available.

Yesterday they were offering half off a Tandem Skydive at Skydive San Diego, (which for me, somehow doesn't generate the same level of excitement). As the mother of two daughters, I have bought my fair share of tickets to CalBal's Nutcracker, so I know a good deal when I see one.

So, yes! For only $12, I'll take one, but I don't want to go alone... I better tell my friends. But there's only 1 day, 17 hours and 32 minutes before the offer expires and the quantity is limited! The deal "tipped" at 2:45am when the 20th ticket was purchased.

Now it's 6:27am and they've already sold 49 tickets! The race is on!!!

It's too early to call my friends, but I can email them, or better yet, maybe I should just go ahead and buy the tickets now and tell them later.

Now it's 9:23am and they've already sold 650 tickets! The deal is on!!!

And so it goes.

Their success has spawned numerous copycats sites, including the popular LivingSocial. Only last week, LivingSocial received a $175 million offer from Amazon, reports Chicago Breaking Business.

So how could 29-year old Groupon Founder and CEO, Andrew Mason and their Board of Directors turn down such an offer?

Maybe they did the math.

Or maybe they have a larger goal in mind, such as "tech immortality," as suggested by Forbes' Christopher Steiner, to "join the ranks of first-tier Internet companies such as eBay, Google, Yahoo, Facebook, Twitter, and Amazon."

Or maybe they have set their sites on something even higher, (read: Space).

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Comments

December 5, 2010 at 11:56 pm
(1) ebizsubmit says:

2 months back I tried to reach groupon to findout if there are packages for small businesses. But, I found groupon is for big guys. Some time I get frustrated as these big companies have no offerings for small businesses. They must be fair to the market and give equal opportunity to all size of business

I again felt that internet is becoming a tool for big guys only

December 6, 2010 at 5:32 am
(2) Claire Condra says:

I heard an interview the other day on PBS radio. The reporter had made quite a few Groupon purchases, but ended up having to wait a long time (as in months) to redeem some of them because the local businesses couldn’t handle the volume of response. I guess that would be especially true in a service-type business, where they can only take care of one person at a time. I guess part of the benefit for participating businesses is the exposure, but I can see that it wouldn’t be a good fit for some businesses.

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