• http://www.searchmarketingcommunications.com Tim Cohn

    While it does have revenue, Groupon hasn’t added any new value to the market other than through sleight of hand- Groupon removes it.

    The valuation reminds me of Broadcast.com…

  • http://www.rimmkaufman.com George Michie

    Great piece, Greg. If I had $5 Billion to throw around I’d not do this deal either…of course I’d also not be at work right now :-)

    Coupon searches have gone through the roof during this economic downturn as a handful of searches on Google Insight will show, but as you suggest, that phenomena may scale back as the recovery becomes more apparent to more people.

  • http://www.respondingtoopportunity.com Josh Morgan

    Assuming that Groupon’s monthly revenue is $50MM as has been reported ($600MM annually) and a 30% pro forma ebitda (180MM) would mean Google is paying a hair over 29 times earnings. Google’s stock is trading today at 22 times earnings. One ought not forget the amount of cash on hand Groupon has at the moment as well (they’ve raised 170MM +any retained earnings). Plus the intangible assets with the brand value and market position. Guessing Groupon has a few good engineers as well, which Google could surely use these days.

    I am guessing Google can roll in Groupon into their Chicago offices, providing further efficiency and raising a normalized ebitda. It is not out of the question that Groupon will double in size once more in the next 365 days further enhancing their ebitda and dropping the earnings multiple to 14.7 (assuming 30% normalized pro forma ebitda, ceteris paribus) which means Google is buying at a solid discount or, dare I say, a Groupon. Sounds like a good deal to me!

  • http://www.connectme360.com Brian Hayashi

    $5B for Groupon? It doesn’t seem so crazy when you factor in Groupon’s brand equity w/SMBs. http://cnnect.me/goopon

    First, no Yellow Pages brand, Foursquare geomorph or coupon site comes even close to the fanboyish love small retailers feel for Groupon. If the valuation is solely based on the size of the sales force, perhaps buying a yellow pages company make sense. Me, I look at which one of dozens of sales pitches gets the best response from retailers. That’s where Groupon has an overwhelming advantage.

    Google is familiar with all of the arguments why Groupon is ephemeral — in fact, many are the same ones levelled against Google during its early days. I’ve been as big of a critic as anyone when it comes to Groupon’s notion of buying co-ops and calling factoring what it is. But it’s my sense that this $5 billion addresses a key GOOG initiative in a way no other investment could; i.e. how to monetize GOOG’s many and diverse local offerings at scale.

  • http://www.crearecommunications.co.uk/ KJ

    At first glance this does seem like a huge amount of money. Google do get a working brand though that would integrate into their local strategy straight away. It will be interesting to see how badly Google want Groupon.

  • http://www.searchmarketingcommunications.com Tim Cohn

    Call me a skeptic but what if Google’s rumored “offer” to buy Groupon was instead a play ripped from the Microsoft Embrace, Extend, Exterminate playbook?

    Wouldn’t that be a deal?