Yahoo is looking at buying daily-deal powerhouse Groupon, Kara Swisher reports.
Yahoo would have to pony up for Groupon, likely paying a price north of $2 billion (figuring a 6X to 8X multiple on a $200 million to $400 million business).
But we think this would be smart.
Want to know why?
Take a look at this chart we published in May.
Yahoo’s most valuable assets is its HUGE lead in email.
Unfortunately for Big Purple, the the once-fast growing business it has developed with that traffic – brand advertising – is starting to slow.
So how would buying Groupon help?
Groupon makes ALL of its money ($400 million this year?) sending mostly local coupons to its users’ email inboxes.
Its biggest cost is user-acquisition – buying its way into inboxes.
If Yahoo were to buy Groupon, it would eliminate Groupon’s biggest cost AND increase its subscriber base to over 100 million people. Cha-ching!
The kicker? Yahoo is ALREADY making money off Groupon ads in its inbox. See the screenshot of my Yahoo Mail inbox below.
But instead of reaping Groupon’s huge margins, Yahoo is just collecting mediocre CPMs for lousy email banner ads. Worse, it doesn’t have any relationships with the local businesses fueling Groupon’s spending.