Groupon deal – Google 1 : Facebook 0

This column first appeared in Trak.in on 24 November 2010


The deal has not yet been announced, but like any Google acquisition this one is making waves on the in the media. Before we analyse the implications of this deal lets understand the players in the arena:

Google:

A media company that enables consumers to get content in various forms for free through its products like internet and mobile search, email, maps, videos, and so on in exchange for relevant advertising placed alongside the content. Google makes money only when consumers click on the ads while consuming the content. Increasingly, the company seems to be losing traction to communities on the net where consumers want to hang around.

Groupon:

A marketplace that allows local businesses to offer huge discounted deals to groups of people who buy them online. It makes sense to the local businesses because Groupon sends people their way who otherwise would not have bought anything in the first place.

Facebook:

A social networking platform where people hangout to get connected to their personal, social and work circles. The platform allows people to share comment and in effect influence each other’s decisions on a wide range of subject. In other words Facebook is a media platform that allows advertisers to map their products to the needs of their consumers using the trending of the consumer’s social graph of needs. Facebook launched FB Places and FB Deals a few weeks ago – this has the potential to become a platform where local advertisers can place ads based on the consumer’s physical local presence.
Ok then, these three hugely valuable companies are the players in the media / advertising space. Google’s dominance is being threatened by the stickiness of Facebook and the only way to counter was to start looking at businesses that allow consumers to stick around longer. Groupon is a fantastic fit. It sits on top of the search+maps+adsense+admob+videos reaching a large audience who are increasingly buying on the net. It’s a perpetual motion machine – local businesses can offer deals on Groupon , advertise them locally using any of the Google options. That’s value and a huge scalable business as time goes by.

In the battle for owning the local advertising space now Google has an edge over Facebook. Groupon already has a huge traction with deals in over 150 cities across mostly US. Facebook is just getting started. If this were a punch-up for the Olympic Boxing Goal then I could shout out loud that Google has won this round with a knockout blow to Facebook’s chin. It will be fun to watch what Mark Zuckerberg does now to bait Google.

There are a number of Groupon clones in India and am sure all of them would be rubbing their hands with anticipation of suckering a few VCs to invest. And am sure there will be a rash of new ventures that will try to create some value by having some differentiator.
To be honest in India, I see Rediff as the only company that can truly go local. They have a great story as part of the folklore of Indian Internet and have had experience [incidentally, they completed 15 years today] in creating a local ad platform / product. If Rediff can quickly come up with a Group discount product, then Indian game would have truly started.
While we revel in the 6 billion dollar valuation for Groupon lets also keep an eye on the other erstwhile king of tech – Microsoft. My final take is that in the cat and mouse between Google and Facebook, Microsoft might spring a surprise.
This coming year will be exciting for all of us.