The schadenfreude is thick in the air: Groupon is now trading for just about the $5.75 billion Google offered it in the fall of 2010!The implication being—what, exactly? That Groupon should have taken that deal instead of going public last year?
Well, hold on a minute. Let’s play what if.
Google has been in the sights of antitrust regulators for years. A huge deal for the next big thing in advertising—and that’s what Groupon’s online discounts really are, a new form of advertising—would have drawn immediate scrutiny.
A full review might take as long as 18 months—and the deal might get rejected at the end of that drawn-out process.
Groupon’s board obviously thought about this. According to Frank Sennett, author of Groupon’s Biggest Deal Ever, a forthcoming book, key investor Eric Lefkofsky was “neurotic” about facing 18 months of sleepless nights.
During that time, Groupon would be essentially frozen.
How would it hire? How would it make acquisitions? Raise more cash to fund operations and expansion? While Google couldn’t interfere until it actually acquired Groupon, Groupon executives would constantly be looking over their shoulders towards Mountain View.
As Google and Groupon were doing their dance, LivingSocial raised $175 million from Amazon.com. With Amazon’s backing, LivingSocial would have gone to town on Groupon’s merchant base—and maybe snapped up some of the startups that are now a key part of Groupon’s portfolio.
And if Google had acquired Groupon, what then? We’d argue that Google’s algorithms-über-alles approach to everything would have destroyed Groupon’s core values—from its humour-drenched email newsletters to the human salespeople who sign up businesses.
Oh, and while it’s zero comfort to shareholders who bought at $20 or more, Groupon insiders cashed in big in a financing round after Google’s offer but prior to the IPO.* That’s a payday they might never have seen had they waited out a Google deal.
Yes, Groupon is currently valued at about the same dollar figure that Google offered a year and a half ago. That doesn’t mean Groupon CEO Andrew Mason and his board were dumb to turn Google down.
Sleep easy, Lefkofsky.
*An earlier version of this post said insiders cashed in at the IPO. In fact, they didn’t; they’d sold shares in an earlier private financing.