Rumors of a Google/Groupon deal have been swirling for weeks, Internet search giant Google is thought to have bought Groupon, the pioneering online discounter, for around $2.5 billion, an anonymous source tells the news site Vator News.
Groupon.com is a website that offers consumers major discounts on products and services — if enough people sign up for the deal.
In other words, the service leverages the economies-of-scale made possible by the web to make it worth a merchant’s while to offer the steep discount. Groupon then gets a big cut, about 50 percent, of every sale made.
In only its second year, Groupon is on track to generate $500 million in revenue, making it one of the fastest-growing startups in Internet history. The local online-deals space is booming, so it makes a lot of sense for Google to get into the market by gobbling up a lead player earlier rather than later.
Tech website Vator.tv said on Monday: “Google has just purchased Groupon for $2.5 billion, according to an unnamed insider who spoke with VatorNews.”
Although the website affirmatively reported that the deal is done, it posed the news as a question in its headline: “Google Buys Groupon for $2.5 Billion?”
Both companies did not respond to requests for information about a potential deal, Vator said, but a research note emailed yesterday to investors by ‘The Benchmark Company,’ a New York-based investment firm, helped the fledgling report pick up steam.
“We view this move positively,” Benchmark analyst Clayton Moran wrote in the email. “While expensive, Groupon provides Google entry into the emerging daily deal segment.”
“Groupon is local in nature, which could build on Google’s positioning in the ‘long tail’ with small and medium sized businesses. There are potential synergies with Google’s core search.”
TechCrunch reports that Internet marketer John Boyle has taken creative liberty with the rumors circulating about a Google Groupon acquisition and created a website called “Groupon for Groupon,” which is exactly what it sounds like. Check the site screenshot above.
So, a Google Groupon union definitely makes sense. Groupon is the largest, and most well-known, daily deal site on the web — it was valued at over $1 billion following a large round of funding in April.
Just like how Google’s $1.65 billion YouTube purchase makes more sense now than it did in 2006, purchasing Groupon could easily pay off for Google down the line. It’s also clear that Google is getting more interested in online shopping now, having recently launched the fashion site Boutiques.com.
Update 11/30/2010: The New York Times reportes that “Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter said Monday.”
“A deal, in the $5 billion to $6 billion range, could be struck as soon as this week, these people said, cautioning that the talks still could fall apart.”
“Over recent weeks, Groupon has been the subject of scores of takeover rumors. Both Google and Yahoo were among the company’s top suitors, according to the people briefed on the matter, with the latter prepared to pay about $2 billion. But Groupon’s founders rejected the approach as too low.”
“Groupon’s management also was concerned that Yahoo’s business prospects might ultimately hurt the company, and that a stronger tech buyer like Google would give it a competitive edge against potential rivals like Facebook.”
“As Yahoo’s approach sputtered, Google made an initial bid of $3 billion to $4 billion, these people said. But in the face of Groupon’s resistance, Google raised its offer to between $5 billion and $6 billion. The company is unlikely to offer more than that, according to one of the people with knowledge of the deal.” [via Tech Crunch, Wired, Vator (TV) and NY Times]