Yipit: Groupon Wants to Sell Because It’s Scared

Yipit has an interesting perspective on Groupon and why it may be selling to Google: it’s nervous about competition from established online brands and traditional media companies.

Here’s a couple of excerpts from the Yipit post:

[T] brands of these [online] media companies, while not having deal authority, do have product and service authority. They’ve been telling their audience how to spend their money for years. For example, you are much more likely to trust a golf magazine’s recommendation of a specific golf course outing than Groupon’s recommendation. Plus a golf course would rather be recommended by a golf magazine than Groupon.

These large, old media companies with millions of users and strong brands will create real competition for Groupon.

With a bunch of successful, large daily deal services, a service like Yipit (tiny disclosure: I co-founded Yipit) that gives users one place to browse, purchase and manage all of these deals from all of these sources is inevitable. As more of these larger services launch, users will realize there are a so many of them and will seek one place that’s a one-stop-shop. If that happens, Groupon will suffer from just being one of many deals a user is browsing.

I think the post is incorrect about the motivation of Groupon but it does lay out the risks going forward to some degree and correctly implies that consumers are fickle and there are lots of established brands in the segment.

Groupon is a monster and Google ownership would put it at the center of the universe; however there’s are many risks and uncertainties in future execution that go beyond the fact of lots of competition.

What do you think of the Yipit thesis?

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10 Responses to “Yipit: Groupon Wants to Sell Because It’s Scared”

  1. Vinicius Vacanti says at

    Greg,

    Thanks for commeting on my post.  I’m curious to hear your thoughts on what you do think is Groupon’s motivation for considering a sale?

    Thanks,
    Vin

  2. Greg Sterling says at

    I think the money. Certainly they recognize the risks of competition but they could extend their leadership into other areas . . . and they are trying. 

    What doesn’t entirely make sense is why Google would pay so much given the risks of future execution. 

  3. Vinicius Vacanti says at

    I am surprised by how aggressively Google seems to be pursuing this deal.  It would be their largest acquisition ever.

  4. Tweets that mention Yipit: Groupon Wants to Sell Because It’s Scared -- Topsy.com says at

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  5. Edward @ BusinessWebsites.com says at

    A 10x revenue valuation will definitely motivate others whether part of a national brand or not to start a deal site. How much does a licensed deal platform with CC Processing cost? $10K a year plus CC fees? How many email addresses would you say is needed to generate $1m in revenue a year?

  6. Malcolm Lewis says at

    I doubt Groupon is worried about old media – I’m not aware of any old media company that is killing it on the web.

    The bigger question for Groupon is do they believe they can provide a differentiated deals service (vs similar competitors like livingsocial) and will the consumers/advertisers continue to embrace the model.

    Take the money and run is generally a good idea unless you are absolutely positive that your revenues will continue to grow for the next 3-5 years.

  7. Greg Sterling says at

    Agree: take the money

  8. Pat Lazure says at

    Nobody seems to be talking about it, but I think Google is after Groupon b/c it wants “Groupon Stores”.  Groupon has the captive audience.  Google knows how to build an empire w/self-serve ads.  If you ignore the price tag, the low barriers to entry, and low consumer switching costs, and the fact that Facebook is now offering merchants a self-serve deal platform for free, then it is a match made in heaven.  

  9. Perry says at

    @Pat, the GroupOn stores is a product plan (pre-launch), and wouldn’t be hard for Google to imitate. I would expect this to end up as an integrated feature of the Places Business Center app, not a stand-alone product over time.

    @Greg @ Vin. I do think GroupOn moves to scale/advance their model is part of the equation. When Google projects GroupOn’s 2.0 plan forward it looks interesting (and more worrisome, in a “what if they’re right, and scale it?” sort of way). It encroaches/aligns materially into the Google in-house plan for social ad products and live/mobile ad services, I suspect.

    I think the aggressive deal posture and price is equal parts protecting the turf from other exits down the road(e.g. FB, MS), an alpha-dog domination statement in Local (that finally signals their understanding of the importance/reality of SMB “services”), and a clear social media envy and desperation play.

  10. Greg Sterling says at

    Facebook could do group buying itself quite successfully. The only question would be sales … But a telephone channel could be bought or acquired.

  11. Fries says at

    With so many Groupon clones out there, groupon should’ve taken the deal!

    And sites like DealHandler.com and Yipit.com puts the deals at the equal grounds so groupon-clones can compete against groupon.

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