In the past days media has gone wild regarding Groupon and Google. The approach of offering online coupons to customers so they benefit from certain deals brings back one of the oldest marketing ideas (among many others that will not be discussed further such as: product diversification). How should the customer know that he wants something if he does not know that it exists?In this case I do exaggerate, but certain products the customer knows about are not on his or her daily shopping list. Groupon helps out. All of the sudden many products are offered such as a skydive, racing hours or a golf course. These services are interesting and seem to be a lot of fun to many people, but the price always reached a little bit over the top. Through Groupon special deals are offered that might have had a demand for years and this demand is being released.
How does that work? Magic? Definitely not. Products are also sold on the basis what customers are willing to pay for them. Speaking in terms of economics Groupon lowers the price (y-axis) and therefore increases the demanded quantity (x-axis) of any product out there. In my opinion this is a very easy approach and thought, but at the same time so genius. Is this business model viable? In my opinion it is - for now.Google and Groupon
The current New York Times article says that Google has offered Groupon $ 5.3 billion. Investors are concerned about that, because Groupon has an annual revenue of $ 500 million. Further research shows, as the article states, that local online advertising will grow 18 percent (to an amount of $ 16.8 billion) next year.
This merger will give Google an interesting and wonderful opportunity to understand its customers even more. Now google will not only have the customers email addresses and location based information, no, it will give the company much more power in terms of customer insights. The real value of buying that company is the customer insight. Groupon reveals a huge stake of information in terms of what the customer really likes and is interested in. Apparently Groupon has 35 million subscribers worldwide who buy every now and then certain services or products. This information will enrich Google by a lot.
So the questions that should arise to us are: 1.Is the offer of $ 5.3 billion overrated? 2. Did the antitrust division thought this through? 3. Aren't customers becoming even more translucent (see my previous blogs) and justifying my hypthesis of the - translucent customer?
I totally agree with you about how good the idea of Social Commerce is. Mainly because of the advantage that you mention regarding services that are not targeted to everyone, such as skydiving and helicopter flying academies. I think that Google will materialize this acquisition due to the immense advantages it would bring to the search engine. These result in turning a passive search in Google about a business into actively getting customers and businesses in touch for potential transactions. Also it is quite interesting the fact that Amazon acquired yesterday the closest competitor of GroupOn (LivingSocial), for far less money than the possible Google-GroupOn deal ($175 million). However, it only reflects the potential that internet giants have noticed in Social Commerce.
ReplyDeleteIf you want to take a look at all these topics in this comment you are welcome to stop by my blog and check out my publication this week:
http://the-positioned-blog.blogspot.com/
These are all very good points Lukas, but what I think it comes down to is, like Anibal has stated, social commerce is the future of how companies will not only market their product, but how they will sell it. You can split hairs as to whether Google overpaid for GroupOn, but the fact remains that the business model is attractive and right now, their may not be a hotter thing going in America. Add in that Amazon purchased LivingSocial and the battle lines have clearly been drawn. Titans of the internet like Google, Amazon, Yahoo, and even Facebook see the value of social commerce, and it only enhances the value of your business to have something like GroupOn in your back pocket. Anyways, please feel free to check out my thoughts on the subject at: http://marketingforthecommonfolk.blogspot.com/
ReplyDeleteIn recent news Groupon has turned down Google's offer of the $5.3 billion. In this article you can take a deeper look into why Groupon says no thanks, which was written by Chris Aconley. Also here is another article that states 6 reasons why Groupon's rejection of Google is good for the universe written by James Altucher. I for one say that Groupon should have taken the offer, you can read more here at my blog Dabz.
ReplyDeleteI think it's a mistake by the Groupon owners not to sell their company to Google. There are to many variables in this new "Social Commerce" area. Internet fads tend to have a short life span and there is no guarantee Groupon will remain on top as many copycat competitors are beginning to spring up in hopes of copying Groupon's business strategy. If I was the owner of Groupon I would have taken Google's $5.3 Billion dollar offer and retire somewhere down in the Florida Keys.
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