Google Said to Bid $6 Billion for Groupon

Google (GOOG) is offering around $6 billion for e-commerce coupon site Groupon, according to several media sources. It is likely that the initial payment will be $5.3 billion and $700 million will be used as an incentive to keep current employees, writes AllThingsD.The transaction would be a windfall for the Groupon's investors, including Silicon Valley's Accel Partners, as well as Russia's DST Global, Battery Ventures and New Enterprise Associates. Groupon is only two years old.

The social shopping network only has about $600 million in revenue, so the price seems high. But industry experts believe that figure will grow rapidly. Groupon gets its revenue by offering steep discounts to its members from retailers. The retailers in return get large amounts of traffic for their inventory.

The deal goes a long way to showing the difference between old online media and the new wave of social network-based sites. Most analysts believe that Yahoo!'s (YHOO) stake in China e-commerce business Alibaba is worth over $10 billion. That makes the market value of the portal only about $12 billion. And Yahoo! has about $6 billion in revenue.

Why would Google spend so much on Groupon? The search company continues to buy what it cannot build on its own. It has purchased firms like DoubleClick and On2 as a means of adding online infrastructure and advanced software. It is in the process of purchasing ITA Software, a platform for travel e-commerce, for $700 million. This transaction, however, could still be blocked by the Department of Justice because it may put too much of the online travel booking industry in Google's hands. It is too early yet to tell whether Google's competitors will be able to make a similar case against the Groupon deal.

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Ange Purs

Google seems to have more money and than sense these days. $6B for Groupon???
Ridiculous. Google ought to review its business model or revise it. Maybe Google has had its day in the sun. Remember that the CEO was recently edged out to be replaced by one of the founders.

February 08 2011 at 1:41 AM Report abuse rate up rate down Reply