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Groupon Files For IPO While Google Offers Could Be Its “Next Billion Dollar Business”
Google took its first daily deal baby steps yesterday with the launch of its first Google Offer in Portland. It was reportedly a hit for the business owner and a success for Google. According to CNET and ClickZ the first customer hit Floyd’s Coffee Shop within about 10 minutes of the offer going live.
Overall, ClickZ reported that 1,708 vouchers out of a possible 2,000 were sold. Today’s Google Offer (a billiards club) has sold 432 out of 500 possible. So far, so good for Google.
Meanwhile just about 2,000 miles away Groupon, the bellwether for the daily deals segment, just filed its S-1 form supporting the company’s forthcoming IPO.
Revenue Growth Amazing
The Groupon S-1 numbers are really big:
- $713 million revenue in 2010 but $420 million in losses
- $645 million in revenue in Q1 2011 with $117 in losses
This year Groupon is on track to do nearly $3 billion in revenue. This puts the company easily in Facebook-revenue territory.
Given the astronomical growth of Groupon Google’s nearly $6 billion rumored-offer for the company last year seems less outrageous than it did at the time. It’s very easy to see why Google is so bullish on the local deals business — especially when you consider that nearly 80 percent of US small businesses have not yet tried them out.
Offers Google’s “Next Billion Dollar Business”?
Offers could easily become Google’s “next billion dollar business” a couple of years from now. If it’s going to get there, however, Google will need to massively beef up its sales force — or “resellers” in the alternative. Consider that Groupon has roughly 8,000 employees (based on Andrew Mason’s statements in an interview at D9) and half of them are in sales.
Groupon’s customer acquisition strategies — the company now has 83 million subscribers — are based almost exclusively on social media and paid search marketing. According to the S-1, Groupon spent $263 million on online marketing in 2010:
For the year ended December 31, 2010, marketing expense as a percentage of revenue for the North America and International segments was 23.4% and 59.6%, respectively. In 2010, we made significant marketing investments in our International segment to accelerate growth and establish our presence in new markets.
Google a Direct Competitor, Groupon Poached Google VP
Groupon mentions a number of competitors in the S-1 filing, including Facebook, Google and Microsoft. While those companies are destined to show up on a lot of competitive lists, Facebook and Google have directly competitive businesses and Microsoft is distributing deals (in mobile). Between Facebook and Google, the latter is probably more directly competitive with Groupon.
That doesn’t mean that Google Offers is a “Groupon Killer” and that the two businesses can’t peacefully coexist. The market has room for a number of “winners.”
Interestingly, Groupon’s COO, since the departure in May of Rob Solomon, is Margaret H. Georgiadis. Georgiadis was formerly VP of Global Sales Operations at Google. I was unaware of her hiring; I don’t think I saw a press release or other coverage.
The total value of the anticipated Groupon IPO will apparently be a relatively modest $750 million. Still that could value the company at more than $15 billion.
Postscript: Now the negatives about the Groupon S-1 are coming out. Groupon’s losses are growing and so are their customer acquisition costs according to some calculations. Yipit says that in its most mature markets, Groupon’s core business is “deteriorating.” I round up some of the negative, day 2 analysis on Screenwerk.