Straying along with the famous song by The Beatles, now all the lonely people will be able to socialize while shopping, the apparent two most desirable things of the youngest generation. Groupon's undeniable, innovative idea has made the company one of the fastest growing in the technology industry. Even the great white shark of cloud computing and internet search has been loudly stalking this new juicy prey, which has reported high rate earnings since its launch around two years ago.
With Google's interest in buying the Chicago-based company, Groupon has been dealing with a lot of publicity in the last week simply because of Google's bid in acquiring this successfully group buying activity. Thus, this mediatize advertising may have helped the local company increase their status and draw in some new customers eager to check out what the fuzz it's all about.
However, according to the Chicago Breaking Business and Bloomberg, Groupon has rejected Google's offer, which was approximately around $5.3 billion with a $700 million earnout. While it is not the first time that an offer from the giant firm has been turned down (see Google and Dodgeball), many people believed that an IPO is a better solution for investment and equity share than a buyout.
Why would a relatively small company like Groupon would decline such an offer from Google? Most of these rejections are primarily due to product concern, that after an acquisition, the prosperity of the business will not be the same. That's right, since we're talking about Google not just any regular company with wealthy resources, that prosperity most probably could've mean doubling its numbers in just a year. But the business its doing more than fine as it is right now. According to AllThingsD, the group buying company is generating almost $2 billion a year, not the $500 million figure that was widely reported, which could have been another reason why the offer was rejected, that Groupon's worth was not being fully considered. Also, that offer would've made the three co-founders practically billionaires, pretty sure that when they started the firm they would've never predicted themselves that wealthy in just two years. Or maybe they just didn't like the sound of their company being called Google Coupon or Google's Groupon.
Whatever the reason was, there were some unquestionable benefits for Groupon through the buyout that made declining the offer a tough decision. First, Groupon and its second closest competitor LivingSocial are reportedly spending more than $1 million a month to advertise through Google. If acquired, it would have significantly reduced operating costs through the giant's search inventory (just as YouTube did), even receiving a more conspicuous position through the search results. Second, more advertising means more customers' attention so probably expect to gain more profits. Even LivingSocial, with just 2 million users less than Groupon, could have benefited by making the group buying business more attractive for others company to do the same for them. But Groupon is the one making the finest deals and drawing more customers:
So Groupon may have a lot to debate about where will they be positioning themselves in 2011. Maybe they'll wait for a new adjusted offer from Google (or another monster firm like Facebook) or even move for an IPO. But one thing its for certain: it is an up-and-coming business, and indifferently of its future location, all the lonely (and not so lonely) people will still have their chance to get their Groupon.
References:
What Google’s Acquisition of Groupon Would Mean for LivingSocial by Lauren Indvik.
By Traffic, Groupon Is Ten Times Bigger Than Its Nearest Competitor by Jolie O'Dell.
Groupon Turns Down Google’s $6 Billion Offer by Ben Parr.
However, according to the Chicago Breaking Business and Bloomberg, Groupon has rejected Google's offer, which was approximately around $5.3 billion with a $700 million earnout. While it is not the first time that an offer from the giant firm has been turned down (see Google and Dodgeball), many people believed that an IPO is a better solution for investment and equity share than a buyout.
Why would a relatively small company like Groupon would decline such an offer from Google? Most of these rejections are primarily due to product concern, that after an acquisition, the prosperity of the business will not be the same. That's right, since we're talking about Google not just any regular company with wealthy resources, that prosperity most probably could've mean doubling its numbers in just a year. But the business its doing more than fine as it is right now. According to AllThingsD, the group buying company is generating almost $2 billion a year, not the $500 million figure that was widely reported, which could have been another reason why the offer was rejected, that Groupon's worth was not being fully considered. Also, that offer would've made the three co-founders practically billionaires, pretty sure that when they started the firm they would've never predicted themselves that wealthy in just two years. Or maybe they just didn't like the sound of their company being called Google Coupon or Google's Groupon.
Whatever the reason was, there were some unquestionable benefits for Groupon through the buyout that made declining the offer a tough decision. First, Groupon and its second closest competitor LivingSocial are reportedly spending more than $1 million a month to advertise through Google. If acquired, it would have significantly reduced operating costs through the giant's search inventory (just as YouTube did), even receiving a more conspicuous position through the search results. Second, more advertising means more customers' attention so probably expect to gain more profits. Even LivingSocial, with just 2 million users less than Groupon, could have benefited by making the group buying business more attractive for others company to do the same for them. But Groupon is the one making the finest deals and drawing more customers:
So Groupon may have a lot to debate about where will they be positioning themselves in 2011. Maybe they'll wait for a new adjusted offer from Google (or another monster firm like Facebook) or even move for an IPO. But one thing its for certain: it is an up-and-coming business, and indifferently of its future location, all the lonely (and not so lonely) people will still have their chance to get their Groupon.
References:
What Google’s Acquisition of Groupon Would Mean for LivingSocial by Lauren Indvik.
By Traffic, Groupon Is Ten Times Bigger Than Its Nearest Competitor by Jolie O'Dell.
Groupon Turns Down Google’s $6 Billion Offer by Ben Parr.
Whatever the reason Groupon turned down Google's offer, I have to admit I'm glad they did. Groupon is establishing it's own turf and there is respect in that. Groupon, although with many competitors, offers an "exclusive" feel to their members. They will be worth much more in another two years so the valuation of their company should be taken into high regard. With Groupon being so successful they should focus on what they can do to set themselves apart from their closest competitor LivingSocial. If they can establish a larger gap between the two companies, they will experience more growth on an already working business model.
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