If you were asked to name Google’s largest acquisition to date, would you know both the company and the amount? With their countless acquisitions this year alone, the growth of their Android enabled phones, and the mounting anticipation that Facebook will post a threat to their business in some form or another, you would be tempted to think that their biggest purchase was within the past year or certainly within the past two years. The answer can be found more than three years ago, when Google purchased Doubleclick for just north of $3bn in 2007. Back then, no one doubted that Google would need to make inroads into display, but hardly any would have assumed their need to make such an enormous acquisition, especially with the growth being seen in search.
Google is many things, but if there is one thing Google has not been, it’s an ad company; there is some slight irony there given how they make their money. It’s not that Google isn’t an ad company per se; it’s that they are much more a technology company that transformed how ads were bought. DoubleClick on the other hand relied heavily on technology, but they looked more like a company selling technology than what we think of as a technology company. Not surprisingly, the integration of the two had some challenges, a culture clash being one of them, and it took almost two years before the fruits of that integration played out in the industry. Yet, when viewed with today’s lenses, that purchase qualifies as nothing short of a major victory. The question now is, does history have a way of repeating itself?
The answer to the question depends on how the latest big, big news plays out. It is expected that any day now, most likely on or just after Monday, December 6, Google will announce a deal that makes their Doubleclick one look, if not modest, less exorbitant. Not only does it make the Doubleclick deal seem somehow less risky, it raises all sorts of questions about just what in the world would happen if this new one goes through. Whereas Doubleclick was around for almost a decade, this one has barely celebrated its second birthday. This company is not a hot social startup like Twitter or Foursquare but an irreverent direct marketer with inaccurate bios for some of the executive team; it employs more actors than Ivy Leaguers and even keeps a bedroom in the office dedicated to a non-existent person. And the purchase price will be close to, if not more than, double Doubleclick’s. Truly a great time to ask, what are they thinking?
Early next week, we should indeed learn that several new billionaires have been created as that is when we expect to hear that Google has purchased Groupon. More than 33 million belong to the movement which is Groupon, the email list of once a day deals that inadvertently answered the question of, how do you solve the local advertising challenge? Not since the heyday of the Yellow Pages has an online company seen such successful penetration of local merchants. Groupon is far from the first to aggregate deals from local merchants. IAC’s Entertainment book has been doing this since any who founded Groupon were born. Restaurant.com also has an impressively large collection of coupons available in an enormous number of metropolitan areas.
Groupon, though, added the rocket fuel to the local couponing model by a) not charging an upfront fee to the merchant (or demanding they give the discount away for free), and b) giving the deals a scarcity element. They last for no more than 36 hours. While not an issue today, initially, merchants could feel safe knowing that the deal would only be valid if a certain number of patrons purchased it. It wasn’t just discounts any more, it was pre-paid customers without brand degradation. As they say, sometimes it’s just better to be lucky than good. They hit upon a model that works for consumers, works for merchants (by and large), and works for media buying. (Groupon spends a lot but only a trickle has come through cpa networks).
Talking about deals, is Groupon a good deal or bad deal for Google? When it comes to such a high-flying venture with such huge numbers attached, it’s not surprising that people’s thoughts are all over the place. VentureBeat argues that Groupon doesn’t benefit from Google’s high tech, low touch approach. Silicon Valley Insider has all sorts of multiple personality opinions. Gropon has a lot of room to grow. It’s a bad idea to sell to Google. No, it’s actually a winner. Either way, it’s not likely to pass much scrutiny in order to close, and that will certainly irk its competitors. Just imagine if Google makes Groupon listings part of its organic search results? Now with the self-serve platform, Google could feature merchant deals with results and not break with the one a day featured approach which has done so well. Even without Google’s massive traffic benefits, the deal is an absolute monster for both.
What a fun spot the company must be in, debating whether selling for $6bn is right. You can just imagine some of the debates – the Facebook angle of, “We can be even bigger,” to the slightly more capitalistic view, “Should I get a 150ft yacht of a 250ft yacht?” Neither is wrong, because they will get bigger with or without Google. They have room to grow in their existing markets, enormous room internationally, and they have just given us glimpses of new angles that will easily double their revenues – from self-service to working with national brands. Groupon has gone from an online to offline play to a true platform – just check out their latest integration with LinkedIn. No one will certainly question Facebook’s decision to enter the deal space. The biggest winner, we hope, is lead generation and performance-based marketing. These are the pillars of what Groupon does so well. They might not fall into the typical lead generator mold, but that’s what they are. To see one that offers a win for all parties, and can scale, is exciting. Not as exciting as being a large shareholder of course.
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