What Google Buying Groupon Means For Search Marketing

Nov 30th
posted in

Is Google buying Groupon? For billions?

The rumor mill is going crazy. And it might be for 5 or 6 billion!

As a comparison, Yahoo! is worth about $21 billion, but that includes over $3 billion in cash AND equity investments in Yahoo! Japan + Alibaba that are likely worth close to $10 billion. In other words, Google might be offering to buy Groupon for 75% of the value of Yahoo! (excluding their cash on hands & foreign investments). $6 billion would be more than Google paid for DoubleClick and Youtube combined.

Groupon is a discount site that offers one major deal per day. Some are saying Groupon would be an unusual purchase for Google, as Groupon has no leading edge technology that Google is desperate to get their hands on. On the contrary, a Google employee could probably knock together a similar site in day or two.

Groupon offers something much more, however. Groupon offers something that has evaded Google, and every other search engine, for quite some time now.

Local.

Groupon has tentacles deep into local businesses advertising budgets, and on a massive scale. Groupon have a large sales force that hand-holds local businesses into online advertising, and reduces risk by offering win-win deals.

Contrast this with Google, who have found it difficult to get small businesses to spend up large on Adwords. The reality is that search marketing is just too cryptic and time consuming for a lot of small business operations.

Google has never really been able to do direct sales well at all," Ambrose said, citing Google's failed attempt to sell and market the Nexus One smartphone on its own site. And, he added, Google's revolutionary AdWords product is not intuitive for many of the small-town businesses that have caught the Groupon fever. "AdWords for a local business is really, really hard," Ambrose said and pointed out the number of AdWords "experts" and consultants offering their services to brick-and-mortar businesses

At the time of writing, nothing official has been announced, however.

Regardless if Google buys Groupon or not, Google's on-going march into non-traditional content arenas is unmistakable. There used to be a separation between search and state - heh - but there isn't anymore.

Google's recent moves should be a wake-up call to anyone involved in the following areas:

1. Coupons

If a company like Google combines coupon offers with local search data, they make local search a lot more enticing. Given Google Place-driven search results are already pushing other local results down the fold, expect to see the same thing happen in coupon searches, too, especially if the Groupon sale goes ahead.

Google also has a voucher program in beta.

2. Local Search

"A new kind of local search result that organizes the world’s information around places", says Google.

One could argue local directories already do this, although Google goes one better and orients around maps. Again, this pushes a lot of locality aimed SEO below the fold.

The hook into mobile applications is obvious, especially with Google owning Android.

3. Thin Affiliate

Google launches Boutiques.com and there's no Google logo to be seen anywhere! There's nothing "Google-y" about it.

There is a tiny link at the bottom of the About Us pages which states:

"Boutiques.com charges merchants to include products on this website in most cases"

Retailers sign up directly, and Google gets rid of various middlemen in the process. Fashion is a fairly innocuous place to start. It looks like a test run, but expect Google to roll out a lot more vertical "affiliate/paid inclusion" sites, especially if Boutiques.com does well. It is not hard to do well when your public relations blitz means you rank in a day. And you can sell yourself free ads!

Common Themes

There are a few common themes in evidence here.

Google is making it easier for the small LOCAL retailer to get into search marketing by providing more options. There is a much greater degree of hand holding evident, especially if you compare this approach with the alternative up until now, which is building a site and then promoting it with SEO or PPC.

(By comparison, small ONLINE retailers which are not local are being thrown under the bus by things like Google Product Ads which promote the largest retailers and are priced on a CPA basis to maximize yield. Most small businesses can't match Wal-Mart when it comes to leverage over the supply chain!)

I suspect Google have learned a thing or two from Facebook i.e. you've got to make it click-and-point easy. The network effects take care of everything else, and Google will largely control those. For the rest, there may be a great deal more hand-holding. Increasingly, vendors will want to be part of the Google platform.

Is it all doom and gloom for SEO?

No.

Google can't own everything. It may be able to provide scalable tools and platforms, but it can't become a publishing house that covers every topic and every industry. The long tail of search is, well.....long.

SEOs need to stay away from competing directly with Google. Instead, they need to provide value that Google can't provide easily, but will still need to display in order to be considered useful i.e. deep content, relationships, customer service, community, and unique-ness.

And let's not even get started on this or that.....

Published: November 30, 2010

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Comments

November 30, 2010 - 9:02am

Although the opportunity for Google seems great to get their hands on the thriving business of Groupon, and make it the GG of the Interwebs, there might be an integration nightmare around the next corner.

One of my good friends was hired to run a country for City Deals in Europe, acquired by Groupon. He quit after three days.
1. As the MD, being micromanaged from HQ was not very attractive
2. Local deals were too successful, which leads to customer un-satisfaction because of the Groupon expiration date vs availability of the service
3. Bad employee management and culture

Take the complaints from the small retailers, where more than 50% of the Groupon, in some instances 100%, Groupon might only end up with larger nationwide deals to get more volume. link

Still I think the combination of Google with Groupon makes the big G even stronger. With a cash balance of over $30B, what is $5B as a defensive move/ move into new territory?

The good thing for all others in the marketplace, the integration headache will be huge!

November 30, 2010 - 9:53am

I don't think integration will be a huge nightmarish sort of issue for Google. They will likely do like they did with DoubleClick...keep it separate off the start & then figure how they can fairly seamlessly integrate it. No rush for core integration because they have to keep growing it first. Also one inflection point in the purchase area / a reason to pay a large premium would be the idea of the self-serve model. No idea if it is a fad or won't work, but if Google does buy it will in part be because they hope that part works. And then they basically get to use Google as a free distribution point from then on. If that doesn't work though then Google is being a good bit thick in the acquisition, because discounting is counter-cyclical & there are public companies in the coupon space trading at a multiple less than 5 years earning.

The thing you mentioned about a lot of these networks being somewhat predatory & trying to eat well over 100% of the margins is entirely accurate IMHO, and that is why they are often such a bad deal for the advertiser. There was recently a similar complain about OpenTable eating all the margins of restaurants:

You see, our market economy doesn't reward producers, it rewards gatekeepers. You don't make money by building roads. You make money by finding (or creating) bottlenecks and setting up toll booths.

Of course there is another side to that story, but the general idea of promotions to drive quick bursts of volume reminds me of the story about the time KFC gave away free chicken and there were concerns about freetards offering to beat down paying customers because there wasn't enough chicken. Also when we announced that we were going to increase our monthly rates here we got so many subscribers that I was burned out for months. I then had to close the site off to new members for a few months while I could sorta let the membership level go back down to a more comfortable level. But the thing is, the people who were interested in the discount/deal tended to be higher maintenance and higher churn as well.

November 30, 2010 - 9:18am

Every time Google buys a new company or launches a new service it is crushing a lot of small business around the globe. Sure it will help searchers in most cases, but I can see how they can keep taking more and more of the Internet into their possession. I fully understand why they do it, but with all the huge fines and regulations against Microsoft, when will it be Google's turn?

November 30, 2010 - 9:28am

I think Google figures they have to keep moving faster than regulation can. And that way, when regulation finally does catch up with them, they can maybe shed some non-core stuff and still have most of their core stuff under 1 roof.

Keep in mind that even when anti-trust concerns get involved that investigation takes time, prosecution takes time, and appeals take time. By the time there is anything public on this front you can probably bet Google still has another 2 to 4 years left in them to fight legal action.

November 30, 2010 - 9:33am

I completely agree and it was more a wish than a realistic hope on my part. It'll take a lot of small business to go out of business for the public to see the "Google Effect" and it might never happen at all.

November 30, 2010 - 9:59am

People will not associate most of that with Google though, as many of the businesses that go under will have some counter businesses around the world that are successful.

That said, if you think about the history of the world there has always been a "survival of the fittest" drive in one way or another: diseases, wars, business & economics, etc.

Those who are leveraging the web have many low risk and low cost ways to grow their businesses. But a lot of people are using the dodo strategy, which is bad for them but creates additional opportunities for others. Google was a dominant force when Groupon was created & yet Groupon came from nowhere to create a new market.

November 30, 2010 - 3:35pm

"SEOs need to stay away from competing directly with Google. Instead, they need to provide value that Google can't provide easily, but will still need to display in order to be considered useful i.e. deep content, relationships, customer service, community, and unique-ness."

That's right on Peter.

For as long as there are Search Engines we will be able to provide SEO to our customers.

There will always be business owners that want to advertise on the front page of the majors.

It's human nature to want to out perform the next guy. Especially with advertising.
Business owners will always know that advertising is a major part of their success.
And popular search engine front page ranking will always be one of the top 5 places to advertise.

So as SEO providers let us say,...bring on Groupon, we still have front page rank marketing to offer.

JohnRobbins & Techndu

November 30, 2010 - 11:27pm

thanks for the insightful post, Peter. I found this part particularly interesting:

"Google can't own everything. It may be able to provide scalable tools and platforms, but it can't become a publishing house that covers every topic and every industry. The long tail of search is, well.....long.

SEOs need to stay away from competing directly with Google. Instead, they need to provide value that Google can't provide easily, but will still need to display in order to be considered useful i.e. deep content, relationships, customer service, community, and unique-ness. "

All the stuff Aaron has been saying (and quite obviously rightly so) about SEOs having to start to compete with Google in the SERPs, google pushing the organic ads below the fold.... has got me a little bit paranoid admittedly ;-), and ive been wondering what it means for the future of SEO.

one thing that alleviated my paranoia a little bit, though, is that despite saying all those things Aaron seems pretty calm about the future of SEO.

I assume by understanding where Google can't compete with us, but needs other webmasters, we can avoid this problem by simply
- only developing own sites in niches with a long long-tail
- only doing consulting in industries with a long-tail
- only getting into/focussing on long-tail keyword spaces that can bring in relevant traffic to your business (if youre doing SEO for a large e-commerce kind of site)

Of course, that's a simplified list assuming that the long-tail is the only opportunity where google cannot compete with SEOs. I assume "understanding where google cant compete with you" is an extremely important part of keyword research in any decent SEO's arsenal from now on, right?

December 1, 2010 - 5:18am

Google can compete on longtail. :)

They are soon launching an ebook marketplace, and at some point I wouldn't be surprised to see ad wrapped ebook passages ranking in the search results.

December 1, 2010 - 6:01am

Hmmm... "interesting" LOL.

I definitely need to learn more about this.

I'm starting to totally realize what you said about SEO becoming more complicated and me underestimating how difficult it got to be for a complete beginner to start to get the hang of this sort of stuff. (personally, I like that it's getting more "technical" as I was a bit dissappointed that SEO was so much about link building in the beginning)...am just more than a bit wary about the future of SEO).

doesnt seem like you believe that those SEOs who can keep up with all of those changes, will be out of work anytime soon, though, right?

PS: am certainly not asking you to give an in-depth explanation of this in the free version of your site (i can see that it depends on a ton of other factors as well)!

December 1, 2010 - 7:05am

It is not becoming more technical, so much as it is becoming more abstract AND more holistic. SEO = marketing = SEO.

December 1, 2010 - 10:27am

If the rumored acquisition is true, and the speculation in the comment thread that Google is making the acquisition to become more local is accurate, it seems like a lot of money to pay for a firm that does not have particularly close ties to its business clients. While Groupon has built an emotional bond with its members that buy the coupons (including my wife), the businesses that sell them have very little loyalty to Groupon. I just don't see Groupon being a wide enough moat business to be worth a massive premium. Assuming the rumors are indeed true, obviously the folks at Google perceive something that I am missing.

December 1, 2010 - 12:03pm

SEO = marketing = SEO.

This is going to separate the men from the boys.

December 1, 2010 - 2:41pm

Yup. A few years ago I would have been on the wrong side of that one, but I think I am starting to get to where I would be on the right end of such a move. Evolving with the market :)

December 1, 2010 - 9:18pm

Im not sure what oyu mean by SEO = marketing = SEO...

but SEO becoming more abstract+holistic...thats really what I meant to say by "more technical".

I probbaly used the word "technical" in the wrong way here (keep in mind Im German). I didnt mean to say its gonna be more about coding and the like, but ...well yeah the kind of stuff Ive been asking in the recent comments LOL, so thats probably what you mean by abstract+holistic (i would assume).

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