Should Google Have Gone After LivingSocial Instead?

Yes is the answer. After rumors of big funding last month, the news comes via the NY Times and others that LivingSocial just secured another mega-round of investment — this time $400 million.

According to the Times:

Less than four months after landing a $175 million investment from the e-commerce giant Amazon, LivingSocial last week raised an additional $400 million from existing investors like Amazon and Lightspeed Venture Partners, and several new ones including T. Rowe Price and Institutional Venture Partners, according to two people close to the company who spoke on the condition of anonymity.

The deal values the company at over $3 billion. As we all know, Google unsuccessfully attempted to buy Groupon for almost $6 billion. In November last year I wrote:

LivingSocial, the “Avis of group buying,” could be acquired for less than half of the proposed Groupon amount and would accomplish most or all of the same objectives for Google. I suspect, however, that Google is fixated on buying the leader in the space, as it did with YouTube. Over time, however, Groupon is likely a less valuable asset than YouTube though it has a clear and immediate revenue stream in a way that YouTube did not.

LivingSocial could have been acquired for probably less than $1 billion at that time. In retrospect Google’s failure to go after LivingSocial instead of Groupon looks like a major error.

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