Why Google May Be Willing to Pay $5 Billion For Groupon

Dec 1, 2010  •  Post A Comment

"Google may be on the verge of clinching its biggest deal yet with a reported $5-billion bid for Groupon, the fast-growing company that is blitzing the Internet with daily coupon deals."

So writes Jessica Guynn and Andrea Chang in the Los Angeles Times. Since that’s an astounding amount of money, why would Google be willing to ante up so much dough?

Guynn and Chang explain why in their article: "Despite Google’s success in selling text ads that accompany search results, it has missed out on online coupons that are influencing how people spend money offline."

The article continues, "That may help explain Google’s apparent willingness to pay billions for Groupon. An estimated 42% of in-store sales are influenced by online research, but only 7% of purchasing takes place online, Susan Wojcicki, Google’s senior vice president in charge of advertising products, said at a recent conference. Investors may be less certain. Google shares slipped 4.5% Tuesday over what analysts said was concern that the price tag may be too hefty."

And, as the article notes, " ‘Google’s got the cash to spend, and Groupon is one of the few properties worth hunting,’ BGC Partners analyst Colin Gillis said. ‘If Google buys Groupon, we will have to wait and see if it’s worth the premium Google has to pay.’ "

21 Comments

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