Why Google may want Groupon

The Groupon website.

TEXT OF STORY

Kai Ryssdal: There were some more reports today about Google and how it's about to spend a big chunk of money on a company that's all about saving money. Groupon, as in coupon, as in that's what it offers -- daily deals on things like spas and local restaurants. Word is Google will pay somewhere north of $5 billion for the company. Not exactly a steal. But Groupon does have something Google really wants: The attention of local marketers.

Marketplace's Jennifer Collins reports.


Jennifer Collins: Over the last year, Groupon has gotten its share of media lip-service.

Montage of shows: It's called Groupons. Groupons.com now has operations in 35 cities and claims to have made more than 800,000 deals. Now, what is a Groupon?

I can answer that. Groupon sends members an e-mail every day with a new deal -- say 60 percent off at a local beauty salon or half off at a local restaurant. The key word here is local.

Lou Kerner is with Wedbush Securities.

Lou Kerner: More than 80 percent of all purchase are made within 15 miles of the house. So to some degree retail is like politics. It's all local.

Kerner says Google has had a hard time attracting local advertisers who don't rely so much on search. Groupon doesn't make its financial results public, but Kerner says it's expected to bring in more than $400 million in revenue this year, lots of it from local advertisers. And its membership is multiplying fast. Bust does that make it worth more than $5 billion?

Sucharita Mulpuru is an analyst with Forrester Research.

Sucharita Mulpuru: I'm not convinced that this growth is going to continue on forever. There are a lot of obstacles that they have. Not the least of which is continuing to procure great deals in all of the local markets in which they exist.

And Mulpuru says Groupon's got plenty of competition. Several competing sites, like LivingSocial or BuyWithMe, could chip away at Groupon's market.

I'm Jennifer Collins for Marketplace.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.

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