Google Buying Groupon is a Flawed Idea | Hacker News Reader

Google Buying Groupon is a Flawed Idea

continuations.com

34 pointsbjonathan26 comments

Two points:

Groupon should want to get out of this market, it's a race to the bottom, the days of skimming 50% off the top are going away as services like LivingSocial, GiltCity, and a billion other knock offs drive profit margins lower and lower.

Groupon recently launched their Merchant Center ( http://www.groupon.com/merchants/welcome ), which seems right up Google's alley. This kind of self-service, low-margin, high-volume, set-up is the kind of thing that Google has the scale to completely dominate. I think Groupon's brand + Google's Scale could equal profit, and if Big G is looking at that this deal might make sense after all.

The most interesting aspect of this deal is that even though Google is today's most engineering-focused major corporation and the biggest advertising company in the world, a consensus is emerging that they're incapable of successfully developing new products or expanding into new advertising markets on their own.

Why create a competing product from scratch when you can afford to buy the proven product? And don't forget about all of the existing Groupon employees you could hire.

Because once you enter the mode of acquiring your way into new products, it's hard to shake it; it distorts the internal incentive structure.

once you enter the mode of acquiring your way into new products, it's hard to shake it

If you've been following Google, then you know they are no stranger to acquiring existing products. And as far as I can tell, their business isn't going down the tubes.

It would seem that the sales people at Groupon become less valuable as Groupon clones and Woot-type sites gain traction. As they become more popular among consumers wouldn't businesses start clamoring to get listed, negating the advantage of the skilled deal negotiators? Although every business would want to be on the largest site, which would be Groupon.

Would buying Groupon and running it independently like Zappos and Woot for Amazon somehow keep Google out of the eyes of regulators in a way starting a clone wouldn't?

What I don't understand is why Google doesn't go a layer up from this and aggregate across the many deal sites. Outside of the US, the clones are the leaders in the space. Google could work to provide search across the multiple deal providers, provide custom alerts when particular products and services become available (just imagine the value of knowing which items a person is watching to see when they go on sale!). Google Deals could be much more powerful than a single site app like Groupon.

Buying Groupon, especially at the rumored prices, is a weak move. Incidentally, I signed up for the service and unsubscribed after two days. It's of zero interest to me to have irrelevant garbage deals pushed at me, so maybe I am missing some key spam/bacn tolerance level needed to grok it.

Why indeed? Especially when the company has grown so large and sclerotic that developing new products has become a struggle against entrenched corporate bureaucracy. I'm sure it's a very tempting and logical proposition, in the short term.

>Especially when the company has grown so large and sclerotic that developing new products has become a struggle against entrenched corporate bureaucracy

Out of curiosity, what do you have to support the claim that google has become this slow-moving monolith (yes, I'm paraphrasing) other than random articles from tech media? If you have first-hand knowledge I'd love to hear it because google is still a great company to work for in my eyes and I'd like to hear the opposite view.

one way of looking at it is, ask yourself how many new products/services has Google launched this year, due to internal development? And then compare that number to their total employee count of about 22,000. Do you think if say you split off just 50% of those folks, took them and spread them out between hundreds of small little startups each with a fresh and independent entrepreneurial drive and vision, and all legacy process/culture/tradition/rules stripped away, the end result would be way way more new products and services and innovation released into the market? For me, the answer would be yes, I'd expect that. Purely on a people numbers basis, and speaking in general terms. (Of course, it would depend on lots of other factors like the nature of the individuals, etc. But you get the idea.)

A software startup only takes 1-4 decent people to get off the ground, and sometimes it doesn't take a heck of a lot more beyond that to scale it up. Now compare that to Google's 22,000. Yes lots of hard-core optimizing of hardware and software going on there, which I respect. But most of them are just polishing corners on Google's legacy products/services, and minding the store, not creating or bringing a fundamentally new and distinct product or service to the market.

Also, based on everything I've seen, I think Google hires mostly for highly academic engineering-focused types -- not entrepreneurs and not highly creative types. They mostly get those kinds only through acquisitions (or acqui-hire, as some have called it) lately, not hiring. This is my impression from afar anyway.

I'd like to echo your question.

It's crazy how quickly the meme that "google is losing it/becoming a slow giant bureaucracy" has taken hold in the recent past...

We need to institute a process to manage the memes of excessive bureaucratisation. They take hold too fast and with insufficient oversight.

I propose we form a working party to thrash out a draft proposal for such a process, to circulated to all the relevant stakeholders in due season.

The defensibility part is what raises red flags for me, I wonder why Groupon would sell right now when they seem to be on a twitter or facebook style trajectory. It would seem like even the board of Groupon may see some real risk in their ability to maintain market share so might see now as the right time to exit.

My uneducated guess: they see more stats that show most business owners aren't too keen on the service, especially AFTER they give it a chance. Even services with a seemingly big trajectory can fail due to these sorts of a customer retention problems.

Exactly. Project out GroupOn's likely future and selling out quickly starts to look very attractive to their investors.

I have said this before somewhere, but Google as the new MSFT has the classic MSFT problem - die if you do, die if you don't.

They are a cash machine, which, sitting idle in the bank will invite ire from investors. If they invest in something, they will still get hell, since, there is a valuation bubble and anything worth picking up will wind up with them overpaying for it.

In Google's case there is little that they can pick up in their core domain - they already slurp up most of the decent emerging talent related to search even as their dissertations are being drafted. The online domain has very few companies that even justify a billion dollar valuation even in adjacent domains that Google makes its living off.

p.s: I'd love to have this problem.

I personally wonder how heavily the Groupon brand affects the way Google is thinking about this.

The Groupon model is reproducible, esp. by Google, who has an army of sales reps. But the brand isn't, and I can't help but think Google wants badly to keep it out of someone else's hands.

There will be a lot of money to be made through the Groupon model for a long time to come, and I can understand Google hating the idea of fighting for brand recognition against Groupon should it get in the hands of Microsoft or Yahoo.

I'm guessing, of course, but the Groupon brand is f###ing golden.

Google wants to buy Groupon for the relationships it has built with local businesses, not the revenue model.

Excellent point. Even though many of these relationships aren't particularly positive, Google will probably be able to convince most of them to give it another try -- and perhaps package it with SEO to make it even more attractive.

I think it's a move to improve Google's local search capabilities. I don't know how sustainable Groupon's revenue model is in the long run.

I'd be curious to know the percentage of new repeating customers that businesses attract after a Groupon deal. Attracting deal seekers is very different from attracting someone who will repeat long term.

I agree with this - the two corporate "cultures" (not sure if that's the right word) don't seem like a good fit and Google is going to absorb a lot of headcount at a much lower revenue / employee ratio than what they're used to. It's a great deal for Groupon though!

While I don't think Groupon is sustainable as the darling of both consumers and the businesses who use it to sell, one aspect of the deal that makes sense to me is that it makes Google a viable first destination when someone is wanting to purchase a product (when they integrate Groupon in searches). When purchasing intent is there, Google makes significant revenue on searches.

As Eric Ries has broken down, as long as the e-commerce world is sufficiently fragmented, users will prefer an intermediary like Google to help them find the right product or merchant. This deal, if it went through, is a step by Google in keeping e-commerce fragmented.

That's a conventional way of looking at it, but what if that big people-network is exactly why Google wants Groupon? Google has been critisized for not having good support or any kind of retail presence and this could be a way to shore up their weakness in this area.

I feel like this is Google's version of Yahoo buying Skype. Overpaying by billions of dollars, marking one of the large failures during Yahoo's decline.

As far as I know, Yahoo never bought Skype. I think you probably meant eBay.

I don't have a reasoned argument composed to back it up, but my gut reaction is that this is where/when Google jumped (is jumping) the shark.

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