Saturday, December 4, 2010

Google Dodged a Bullet

It was reported late Friday that Groupon had rejected Google's acquisition bid of $6 billion. When I first heard word of the possible take over, I thought it was a fantastic idea! However, a lot of talking heads felt that Google was overpaying significantly for this company, largely due to the high demand for a company like Groupon and the low supply of them (though that could be changing fast).

I still thought it was a fantastic idea for Google as they would be entering a market (the local market) that is otherwise too expensive to enter for such a large, global corporation. Two things changed my mind. First, I often listen to This Week in Google netcast, where Jeff Jarvis is a regular. I find that I largely agree with Jarvis' opinions, so when he was so emphatically against the move, saying it would be "Google's Myspace", implying it would be a large financial sink hole, I started to think twice. The real kicker for me was my own bit of research. I quickly signed up for Groupon on hearing the news so that I could form an opinion and was not impressed at all.

The three deals I have received so far: Circus Arts Workshop, The Bistro at Our Town, and Spa Services. The only one I would consider was the Bistro and the others I am SO not interested in that I would consider them spam. For comparison's sake, I have been subscribed to a Groupon competitor, LivingSocial, for close to a month. In that time, I see that close to one third of the deals are for spas? The rest are for random activities (history tour, skydiving, holiday decorations, etc) and only two of them were for food, Mexican and Indian. Sorry still not that interested. This told me that there isn't really a problem with Groupon, but with the current model of these "social coupons".

As much as I hate to say it I actually think Facebook's Deals is a much better model. Its been out for a month and I haven't been bothered by it once, because I would only check in to places that I cared about getting a deal for. I was initially worried about Deals becoming spam-like, meanwhile, I've only had Groupon for three days and I feel like it's spam. Unsubscribe.

Of course this is all anecdotal and their rumored numbers are phenomenal (though they were hard to pin down, ranging from $2 billion in annual revenue from CNET to $500 million by many early on, including CNBC). Regardless they are quite successful! But I don't think the growth is sustainable, how many spa treatments can you get? (By the way, what does it say about spas' pricing model when they are willing and able to offer half price every other day?) I suppose we will find out, I'm just glad Google doesn't have to pay $6 billion to do so.

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