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What makes Groupon so enticing to Google?

Marketplace Staff Dec 1, 2010

What makes Groupon so enticing to Google?

Marketplace Staff Dec 1, 2010


JEREMY HOBSON: I’ve already gotten a Groupon deal in my email inbox this morning. It’s half priced Spanish Cuisine and Drinks at some restaurant downtown. Well that simple business model — daily deals that are all about getting groups of people to buy something at a discount — is apparently really attractive to Google. The search giant is said to be extremely close to buying the two-year-old website Groupon for about $6 billion.

Let’s bring in Henry Blodget for more on this. He’s CEO of the website Business Insider and he joins me now here in our studio here in New York. Good morning.

HENRY BLODGET: Good morning, thanks for having me.

HOBSON: It’s great to have you. So what does Google see in a company like Groupon?

BLODGET: Google sees a huge new growth engine. Google’s core business — search — is starting to mature, they are looking for another business that can drive it going forward. Groupon is one of the fastest growing companies in history. $500 million in revenue and it’s second or third year. So they see a huge opportunity there.

HOBSON: Is this about being a social network like Facebook?

BLODGET: No, Groupon really has nothing to do with social networking. What is does is local advertising which Google has been trying to crack. And Groupon has effectively invented a whole new form of classified advertising which Google thinks it can now go into.

HOBSON: Is Google worried that one of it’s competitors would pick up Groupon if it didn’t?

BLODGET: Yes, Google is often motivated by competitive fronts. But I think the main motivation here is to again find a new big growth engine. Google has cash coming out of its ears so even a huge price tag like the one we’re talking about here isn’t that big a deal for Google.

HOBSON: Henry Blodget — you were at center of a well documented scandal that has you now banned from the securities industry. I don’t want to get into that beyond saying that you know what it’s like to get it both right and wrong on tech companies. How does Google know that it’s right on the evaluation of this thing?

BLODGET: There’s no way that they can know that they’re right. Groupon’s had an incredible start, again $500 million in real revenue, it’s not a hallucination, it’s not based eyeballs. But what you have to remember is that Google has $33 billion in cash. On the balance sheet it’s generating $2 billion a quarter. It can afford to make a big bet like this, even if it doesn’t work.

HOBSON: OK finally — I looked and Groupon, which apparently is worth many billions of dollars, only has 3,000 employees. With all of this big growth in Silicon Valley, are we getting anything out of it in the economy if we’re not getting that many jobs?

BLODGET: I think you have to look at it in reverse. Three years ago Groupon didn’t exist. And now it employs 3,000 people world wide. That’s pretty extraordinary. It’s hard to see that in any other industry. So I think what’s going on in the tech industry is actually very beneficial for both the economy psychologically and in reality.

HOBSON: Henry Blodget, CEO and Editor-in-Chief of Business Insider. Thank you so much.

BLODGET: Thanks for having me.

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