Out Of All Social Media Shopping Deal Sites, Did Google Bet On The Wrong Horse?
After the smoke cleared and Google's all-time highest acquisition offer for Groupon went south, one has to ponder if the search giant should have gone after one of its competitors versus the market leader? And instead of spending $6 billion they could have gotten away with a lot less - say, with a site like, LivingSocial.
According to Bloomberg, LivingSocial is the second-largest Web site for daily deals in a space that is crowded with the likes of JungleCents, Gilt Groupe, BuyWithMe and RetailMeNot - to name just a few of the top contenders.
As timing would have it, Amazon was romancing LivingSocial during the same time period Google was trying to buy Groupon's love. However, LivingSocial's price tag paled in comparison to the Google-Groupon offer. For a paltry $183 million dollars, Amazon has invested in LivingSocial to broaden their reach in the social shopping deal space.
If Google set their sites on LivingSocial versus being spurned by Groupon, they could saved a lot of money - that would have taken years to return a profit- and invested in a company that is looking to expand. LivingSocial will more than triple its employees next year to 1,800 while more than doubling the number of cities it offers deals.
According to the Bloomberg report, that "would bring the service to 300 markets, about the number that Groupon now serves with its staff of 3,000." Based on those numbers, it appears that Google really didn't invest in their due diligence in comparing other companies that knew better how to 'skinny' down their workforce and labor costs, yet cover the same territory.
Additionally, since the space is so competitive, many financial analysts believe that it's not just the number of customers on s shopping deal site's email list that matters, its the potential of making those buyers, "happy customers" so they repeat.
“The winner in this space will win not because they have the largest list, but the best list,” Sucharita Mulpuru said in her blog posting. “By that I mean, knowing who are the customers who will spend more than the value of the deal and who will come back to frequent a business. The company that can identify those people, even if it’s just 100,000 customers, will win.”
Presently Groupon remains the market leader by most reports. In this Experian Hitwise analysis, it's clear that Groupon is doing substantially better in market share than LivingSocial, with BuyWithMe coming in a distant third.
To that point, CEO Tim O'Shaughnessy has been quoted saying he's 'gunning' for Groupon, and feels that Amazon's investment is "an important part of making sure we're not bringing a knife to a gunfight." LivingSocial is also building a mechanism to monitor merchant deals and its ability to attract the best customers - and to that end - Shaughnessy says, "LivingSocial will use the $183 million investment led by Amazon.com Inc. to overtake market leader Groupon."
Shaughnessy's counterpart, Groupon CEO Andrew Mason, who I dubbed the Six Billion Dollar Man in my previous post, "Social Media's Six Billion Dollar Man Knows How To Shop For Deals" may have known what he was doing turning down Google's offer, but it's clear now, it's going to have LivingSocial nipping at its heels. Groupon, which started in November 2008, has 35 million registered users and is set to record revenue of more than $500 million this year, according to two people familiar with the matter. LivingSocial says it will reach that milestone in 2011, now that it has Amazon's money to spend.
So what's Google next step in securing its own social media deal site? With both Groupon and LivingSocial out of the picture, and with Facebook Places' already testing their own shopping model, Google may have lost its chance at grabbling the golden ring. Betting on the wrong horse happens every day in the business world. Some days you win. Some days you lose. However, the question remains: Since Google's got the money to spend, where's the best place to wager their next bet, before the other Internet giants block their entry?