Posted January 4, 2011 10:02 am by with 4 comments

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Following the much publicized courtship of Groupon then eventual rejection that Google got, many questions are swirling around the search giant as to what they will do next in the space they were looking to buy into.

Google’s VP of Consumer Products, Marissa Mayer, did an interview for Mediabistro’s WebNewser and was asked about next steps in that space. The gist of the answer (that starts around the 3 minute mark) is this

We already do things like this with coupons etc …. We are looking at how we can take that technology and put it to use in the location space.

It’s the location space component that Groupon currently doesn’t have and Google could have added to the deal giant’s already impressive repertoire. Now without the Groupon effect, you get the feeling that Google would like to utilize their location, places, mapping and more to allow users to walk down a street and get a Groupon like offer from anyone while the potential customer is right there. NFC technologies and more can make this a quicker reality than many might think (especially with the rumblings that next generation Android devices have parts of this already in place). Gotta admit that if that can be harnessed and delivered so the end user doesn’t go batty with offers every second, this has real potential.

I also wouldn’t underplay any drive that might have been created within Google after they were publically spurned by Groupon. What better way to say “I told you so” then by doing it better themselves and taking 50% off of Groupon’s value?

The big question that remains of course is “Can Google compete with Groupon in this space at all?” If they show signs of being able to hold their own then the race is on. Oh and we did all of this ‘analysis’ without even considering Facebook in the equation.

So will location plus the deal be the real holy grail of this space or will Groupon’s current model be enough to keep it in the front of a very well funded and revenue hungry pack?

Welcome to Speculation Station. What’s your take?

  • Rory Robert

    This is not good news for Groupon. With giants like Google and Amazon joining this game, the competition will become very fierce. Another problem Groupon facing is that it’s the products or services that the buyer cares the most. With the increasing number of deals offered, buyers can just visit a daily deal aggregator like to check all the available deals easily. As a user, it makes absolutely no difference to me if I get an email from Groupon, LivingSocial, or ShopWay telling me about a deal, since I’m after the deal itself. With all of these clones coming up, Groupon’s model runs the risk of becoming a commodity.

  • My wife recently ran a special with Groupon for our cakes and confections company. They contacted her by phone to make the offer, and we were featured on their fourth day in our town. We sold 113 dozen cupcakes that day through Groupon, which was not bad for Groupon being new in the area (Topeka, Kansas).

    All of the sudden, we started hearing from a lot of other businesses wanting to know about running a special. They were mostly stunned by the fact that Groupon wants businesses to sell with a minimum of 50% discount, and then also take half of the gross sales for themselves. That means for every sale, our company took in only 25% of the money. For some companies, this can be pretty costly, and I have since heard horror stories of selling too well through Groupon and regretting it.

    It is hard to guess what the redemption rate of the Groupon coupons will be, to this point. Of course, it is cheaper than some other forms of advertising, but definitely not an upfront money-maker for the business. It is just a good blast of name recognition with a possibility of up-sales and future business.

    What I commonly heard from people asking about Groupon for their business was that they thought Groupon was getting quite a lot more than a fair share. Now, if Google or others are able to coordinate a reasonably successful offer, and make it more affordable for participating businesses, I think it is a winner. To me, that seems like Groupon’s biggest downside.

    • Mark, you are spot on. We only charge 15% commission and although London based are coming to the US in about 8 weeks. The fact that Groupon can get away with a 50% fee does not make it right and makes them an easy target. I also agree with you in that most business dont want 1500 coupon cutters and would rather have 300 quality customers that they will see again if they look after them.

  • Fifteen percent is a long way from fifty percent. Many companies rely on smaller than ever profit margins, and smaller marketing budgets. The difference between 15 and 50 is enough to challenge the value of Groupon. Now, if Google offers you six billion to buy the company, you may want to hear them out and give it serious consideration. Companies in this market, whether copying Groupon or just pursuing a good idea, are certain to encounter a lot of new competition in this market.

    Even in cases where Groupon makes a good business case, any sponsoring advertiser is wise to weigh the benefits carefully when there is such a disparity in the cost.