Google Is Making Moves To Seriously Disrupt Groupon

Andrew mason at ignitionOuch.

Photo: Michael Seto for Business Insider

Groupon’s stock has been crawling back from the abyss, with the company now worth about $3.8 billion.That’s still less than the $6 billion Google offered for the daily-deals site shortly before Groupon went public.

And now Google seems like it’s moving to kill off Groupon by making ads for discounts and deals easier than ever to buy.

Larry Kim, founder and CTO of WordStream, an online-marketing technology company, noticed that Google’s Offers ads—deals broadly similar to Groupon’s email discounts—were now available to anyone using Google’s upgraded AdWords dashboard for managing ads.

Rob Shilkin, a Google spokesperson, told us that the Offers format dates back to 2010, but was previously available only to customers in a limited test. He confirmed that it’s now available to a broader set of advertising customers.

Few appreciated how symbiotic Google and Groupon were in Groupon’s early days.

Groupon would buy ads on Google promising users discounts, persuading them to sign up for its email newsletters. It would then make money on the discount coupons it sold on behalf of local businesses.

It was essentially an arbitrage play on the cost of acquiring consumers via Google and other marketing channels against the profit made on the discount coupons it sold—themselves a form of advertising.

Google subsequently entered the local-discount business with Google Offers. It initially mimicked Groupon’s approach with local salespeople.

By putting offers into the mainstream of Google ad-buying and opening them up to its entire customer base, Google is cutting out the middleman, and creating the powerful feedback loop of data—tracing a transaction from the search results or Web page where a user saw the ad to the redemption of the discount on-site.

That was the reason why Google was so interested in Groupon in the first place. And now it’s created a very threatening way to take away Groupon’s business.

This isn’t lost on Groupon, of course—the prospect of Google gunning directly for its core discounts business is exactly why the company has been trying to add payments and customer-relationship management tools to the mix of services it offers local businesses.

It also has a brand that’s synonymous with discounts at local businesses, and that’s often underrated.

But make no mistake: Google has moved slowly and deliberately, but now it’s showed its plan of attack.

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