Google Buying Groupon – How Does It Affect Ecommerce?

Seems like everyone is talking about Google snatching up Groupon for a mere $5 billion dollars. Yeah that’s right, $5 billion, with a capital B.

Seems ridiculous to have that kind of valuation for $500 million in sales. It seems even more ridiculous that the implied value is based on the money ($170 million) that it raised back in April. So, let’s try to do the math.

Initial money raised (not sure what that is, exactly ) + 170 million April 2010 = Valuation in April 2010 = 1.7 billion, with 500M in sales. This translates to me like, “Hey, let’s invest more so that our valuation will look higher.” Perhaps its not logical, but its hedging your bet right?

BUT, we’re a capitalistic society and if Google wants to over pay for the privilege and the bragging rights, fine by me. What doesn’t make sense to me is that Google, for half of that amount, can create their own Groupon or buy up other copy cats for a fraction of the price. Which actually was good for small Groupon competitor (LivingSocial) as they just got a $175M investment from Amazon.

I’m wondering how this affects ecommerce as a whole. For one thing, there may be a more efficient way to tie in all the local and online advertising under one account. New opportunities can be gleamed from an integrated Google Analytics that will also track all the traffic clicking on the Groupon advertisements/offers.

What would be cool is a feature/function that truly offers missed opportunities for keywords and market segmentation that helps the advertisers and not just the platform provider. On the flip side of this, it’s one less venue for merchants to diversify their advertising dollars, and eventually, the advertising cost will just be higher due to the monopolistic environment.

If you’re a merchant hoping to attract more traffic to your website, do dedicate a separate landing page for your Groupon offer. Just like other optimized landing pages on your site, be sure to test your graphics and offers. Since Groupon takes a hefty chunk of the revenue (50%), be sure to offer products in which you can absorb that kind of margin give away. If you’re counting on buyers buying something else, it’s not likely that will happen at the same time that the coupon is redeemed. But, you will experience higher than usual phone calls, which creates an opportunity for upsells and cross-sells. So, ensure that you have enough staffing for the increase in calls, and figure out a way to manage the call overflows for at least three weeks after the deal goes out.

One last thing is to ensure that you’re include marketing material, and other offers that leads the consumer back to your website, when you send out their shipment.

You can read all about the Groupon/Google courtship here:

Google Said to Near Deal to Buy Groupon for $6 Billion

Google buys Groupon for $2.5 Billion?

PS: Kudos to the Yahoos who help raise up the bidding war just by expressing a mere interest in the transaction.

By: Shirley Tan