Wednesday, December 1, 2010

Retweet: NYT looks at Google's proposed acquisition of Groupon; The Atlantic says is it worth the steep price tag

For many people the company Groupon is still a very under-the-radar type of firm, delivering coupon discounts to a younger, tech savvy audience. But Google apparently wants the company and is said to be prepared to pay a huge price tag to acquire it: $6 billion. That alone should be news. And today, thanks to the NYT and a few other outlets the deal is getting more attention.
Last night the NYT's DealBook ran this feature on the deal written by Evelyn M. Rusli and Jenna Wortham.

Google has offered Groupon $5.3 billion, with the promise of $700 million in performance bonuses for management, according to a person knowledgeable about the matter who spoke on the condition of anonymity. Several people close to the deal said Groupon, which is based in Chicago, was expected to approve the acquisition and an agreement could be signed as early as this week.
The article goes on to explore the background of the deal and opinions on either side of it -- a very good backgrounder.

The Atlantic's associate editor Nicholas Jackson posts this morning this opinion that the deal is worth the huge price tag.
Just two years old, Groupon has built a huge following around a very simple idea: one really good deal every day in every major city. (Today, in Washington, D.C., the deal is $20 for three Bohemian Belly Dance classes, which would normally cost $60.) The fine print: Buyers aren't charged -- and the deal isn't "on" -- unless a critical mass of people sign up. That way, the company or organization being promoted that day is guaranteed to bring in enough new customers to make steeply discounted deals worthwhile.
From Jackson's perspective it's a good deal.

Jon Fortt, writing on the CNBC website, says Google, if it wants to get into the local advertising game, should just buy a newspaper company (really!).

"Heck, if Google is that desperate to get into the local advertising market, it should buy the largest newspaper company in the U.S.: Gannett."

The problem, of course, is that no newspaper company has penetration of as many markets as a company. Further, as I've complained about many times here, newspapers have been slow to use the web and mobile to bring local advertising to its readers, preferring, instead, to just create products that attract a few new national ads (mobile newspaper apps are almost always just RSS readers that have nothing to do with local retail or classified adverting, a huge lack of vision on the part of the industry).