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Google Offers Takes on Groupon

by Navin Ganeshan on February 1, 2011

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If you haven’t been following the daily Google-Groupon saga and the recent announcement about Google Offers, here’s some background info and hopefully some food-for-thought.

Updated Old Fashioned Telephone

For a while now, Google had built-in support for merchants to offer coupons through Google Places (their profile/directory service) – a self-serve model where the merchant creates their own offer and uses Google simply to syndicate.  But this is changing in a potentially big way.   For now, the change is mainly in branding – changing  “coupons” to “Google Offers” – but the expectation is that this will soon be the basis for a more substantial offer service with a group-buy/tipping-point model that would allow it to compete directly with Groupon.
Consumer reach
Groupon has 50M email subscribers acquired primarily through brute-force online marketing and WOM.  Google can leverage its many consumer-facing services to signup consumer email.  But even more compelling, it can rely less on email-based targeting since the offers are incorporated directly into search, maps and the immense ad-network reach provided by AdWords and AdSense.

Merchant reach
It appears that the new offer service will be continue to be part of Google Places.  But unlike the existing self-serve model, Google will likely be activating tele and direct-sales teams to ramp up merchants.  They already have a 300-person tele-sales team as a starting point.

Offer Model
Google will incorporate a group-buying model and similar economics as Groupon (focus on excess inventory, benefit from breakage etc), but speculation is that they settle for a lower share than the 50% that Groupon charges.

Long term considerations

  • With Google ramping up a VSB-oriented salesforce to push Offers, this could be a crucial point in allowing them to market other VSB services they already have, thereby moving Google from a mostly self-service provider to a more traditional full-service provider – everything from Google Apps, Sites, AdWords and could be the entre into entirely new services.
  • While no one believes this is a Groupon killer, it’s likely to at least become another top-tier player along with Groupon and LivingSocial.
  • Anti-trust implications are also unclear – might force Google to take a lower-profile approach.

Significance for Small Businesses
With rising interest levels amongst merchants in daily deals, a Google offering seems likely to resonate as the most direct way to reach consumers – everyone uses google maps and search – assuming Google can match Groupon economics and offer-creativity.   Longer term, it remains to be seen whether Google getting into the mix signals the beginning of the end – that is, will the appeal of daily deals with consumers start to wane once they see it embedded everywhere in their browsing experience.

Will the bubble finally deflate?  Maybe, maybe not since it’s unclear what the real opportunity size is for Daily Deals, and whether there’s room for multiple large players.  But either way, this is not good news for Groupon.

Image via Flickr by Brandi Jordan (Creative Commons)

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    • http://www.pizzacouponsx.com pizza deals

      Might be a good deal for Google, but the price….?

    • http://www.greatbusinessplans.com/business-plan-template Small Business Plan

      Whichever way it goes, the Groupon story will be the 'small business' story of 2011. Did they do the right thing spurning Google's offer? Will an IPO make them even richer? Or are they going to suffer the fate of others (like Yahoo) who turned away huge offers only to never see such valuations again.

      Take a step back from this and put yourself in the shoes of a startup founder. Can you imagine if the founders had been told right after they finished their business plan, “Look, within a couple of years Google is going to want to buy you out for a BILLION dollars. How's that sound?” As we all know now, they said “No thanks. Not good enough.” As startup founders, what is it they're after?

      I still remember years ago when Microsoft tried to buy an early player in the “e wallet” space for $500 million and they got turned down. About 3 years later the company sold for around $35 million. Ouch.

      Stay tuned.