Wednesday, December 01, 2010

Google makes bid for Groupon

This is an amazing story of entrepreneurship and how new companies can change the landscape. It is no small task to go from a start up to being worth $6 Billion dollars in 2 years. Groupon seemed to come along at the right time - consider the economic climate where everyone is looking to save money.

The way Groupon works is that it puts buyers and sellers together in a very unique way. Sellers create deals that are only valid on their terms, they dictate the discount or deal, and specify the number of users needed for the deal to take effect.  This simple idea, which started locally, has spread virally and is a nationwide product that has so much potential now and into the future.

Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday.

At that price, Groupon — known for its daily discounts — would be one of Google’s largest acquisitions, dwarfing its $3.1 billion purchase of DoubleClick, the display advertising giant, in 2007.

The deal would also be Google’s boldest foray in local business online advertising, a large and untapped market it has been trying to get into, most recently by promoting Marissa Mayer to oversee the local business and attempting to buy Yelp, the local review site, last year.

The average Groupon deal offers 50 to 90 percent off retail goods and services, from restaurant certificates to skydiving lessons. It has grown beyond local merchants to encompass retailers like Gap, which offered a nationwide deal this summer. On the day of the Gap promotion, Groupon sold 440,000 units and generated $11 million in revenue.

Groupon’s success has helped turn the company into a cash-generating machine, signing up more than 12 million registered users and reaping more than $350 million in estimated annual revenue.  -From the NY Times

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