A threat of each company is that rivals take away market share and thus profitability. A recent report of Bloomberg is illustrating how Google reacts to an increasing amount of competition with Facebook, Apple, and Yahoo, to only name a few.
Google’s corporate strategy to ensure continuous growth is diversification by acquiring existing firms. Google already invested about $1.6 billion on more than 20 companies this year and for its new target Google is even willing to pay more than $3 billion, private sources of Bloomberg state.
Which company is so appealing to Google?
It is Groupon, a company offering web-based coupons and said to be one of the fastest growing new companies.
An interview, posted in a Wall Street Journal blog, explains the thriving business model of Groupon and points out factors that lure “web giants” like Google.
Summarized, Groupon’s business is simple but very successful. Daily messages are sent to users offering discounts on products and services. Deals, however, only activate when a minimum number of people agree to make a purchase, giving Groupon the possibility to offer cheap group discounts. The businesses benefit from new customers while Groupon gets to keep about 50% of every deal.
A post in a Reuters blog describes two aspects why Google is highly interested in this acquisition. “Groupon not only stands at the intersection of the social web and local commerce, two areas Google is eager to expand into. It is also tremendously successful with millions of customers.”
It is, therefore, no surprise that Groupon is not only attractive to Google. Yahoo has just recently failed negotiations with Groupon and, as Bloomberg’s private sources say, the Groupon management also has not finalized its decision whether to sell itself to Google or raise more funds instead in order to expand the business itself.
All in all, acquiring Groupon would be another milestone for Google becoming even more powerful and in control of the web. Google could use and expand its existing customer base and as people always seek savings, growth in this segment could be expected. However, as Groupon’s business model does not involve much it is also highly sensitive for competition. Thus, Groupon should seriously consider selling as Google has a lot of cash to offer.