Dec 01 2010
Sorry, but $6 Billion for a service that sends a daily email containing a coupon to a local restaurant or nail salon? Has Google lost its mind? Is its $33 billion in cash burning that big a stupid-hole in its pockets that it feels compelled to pull the 2010 equivalent of Time Warner buying AOL? This may be the deal that signifies the shark jumping of the social networking craze. Especially given that Groupon shows absolutely no social tendencies that I can determine other than a call to action to share the spam with a friend.
I signed up for Groupon — the Chicago local online social coupon whatever service — last month, and every morning get an utterly useless email containing a spammy offer to get a plate of cheap BBQ or a pedicure for half-off the list price somewhere in Greater Boston. Sorry, call me dense, but I just don’t get the secret sauce that makes this deal worth $6 billion.
In other words: Sign up to receive a daily deal. Receive the deal. Maybe share the deal. Then redeem the deal. What am I missing here? The NYT goes for the jugular when it questions the payoff for the merchants.
“Not all small businesses are sold on the golden promise of Groupon. Ina Pinkney, the chef and owner of a cafe called Ina’s, in Chicago, said she was curious about Groupon when she first heard about it a couple of years ago. She ultimately decided against using it.
“We did the math up front when they first started coming around to us and I said, ‘No, it really doesn’t make much sense,’ ” she said. “If we were to offer a $25 coupon for $50 worth of food, it doesn’t work.”
Groupon’s cut is half the dollar amount of the coupon, so the average amount of money Ina’s would collect for each Groupon customer was around $12.50, she said.
“I would never produce that much food for such a small amount,” she said.”
As this deal is questioned by analysts and investors, the most plausible explanation appears to be the most insane: Google bought Groupon to keep Facebook from buying it.
This could go down as one of the dumbest deals since Yahoo paid a billion for Mark Cuban’s Broadcast.com.