Thursday, December 2, 2010

Google & Groupon

I really liked James Siminoff's post on the benefits of a Groupon & Google merger.

"Between Android, Google Maps, AdmobAdwords, etc., Google has the best suite of advertiser tools for the local business.  But their penetration into that market has so far been lacking.  And where they do have penetration a lot of it is through middle men companies like Yodle, which is not at all in their best interest.

So if by buying Groupon, Google is able to do even a $1 billion in additional sales to local businesses of either the Groupon product or their other suite of services (which would not be crazy) and because of their very low cost on that revenue they are able to do $500 million to the bottom line then the Groupon deal is worth $12.5 billion in market cap (Google’s current P/E is 25)."

Note: I also think there is a nice Google Checkout play here. Groupon is highly transactional and is a great beach head for getting massive amounts of consumers to sign up for Google Checkout. Google Checkout has struggled because there were few natural tie-ins into Google's other businesses. There was nothing I needed to buy from Google so badly that I would tolerate signing up for Google Checkout. Groupon is to Google Checkout what eBay was for PayPal. This problem is solved for Google now and opens a lot of doors in online payments.