Google, Amazon Play Catch-Up in Group Buying: Analysis and Reactions from BuyWithMe, Tippr

12/6/10Follow @gthuang

In the Wild West of group-buying and daily-deals sites, there’s about to be a major showdown. Investors have been talking about consolidation in this sector for a while now—and it looks like that’s where things are headed.

But not without a few curveballs first. Last week, Google (NASDAQ: GOOG) was widely reported to be pursuing an acquisition of Chicago-based Groupon for a whopping $5-6 billion. Now it looks like the deal is off, with Groupon walking away from the offer on Friday—and perhaps looking to go public in the next year or two. Meanwhile, Amazon.com (NASDAQ: AMZN) has invested $175 million in Washington DC-based LivingSocial, which is currently No. 2 in daily deals behind Groupon, and is rumored to be worth around $1 billion.

Investors with skin in the game are keeping a straight face about these valuations. But investors and analysts not involved in group-buying companies have been much more cautious; some I’ve talked to have dismissed the industry as unsustainable (too much money for too small a market long-term) and indefensible (no real barriers to entry for new players). On this latter point, dozens if not hundreds of Groupon clones have sprung up around the world, though none yet has the scale or reach of Groupon.

What’s undeniable is that the big tech companies were caught by surprise when group buying took off—and now they have to do something about it. It’s the latest reminder that just when the Internet landscape looks like it’s settling into a predictable pattern—Google owns search, Amazon owns online retail, Facebook owns social networks—a startup can come out of nowhere and turn the whole thing on its head. (Groupon has gone from zero to $500 million-plus revenue and 3,000 employees in just two years.) It remains to be seen what Facebook, Microsoft (Bing), eBay, Yahoo, and AOL each will pursue in this sector, but it should be interesting.

I reached out to a couple of group-buying startups with strong ties to Xconomy cities to hear their thoughts on the recent developments. One theme that emerged is that the online technology giants really need feet on the street to cash in on local advertising—smaller stores and merchants trying to reach customers in Boston, say—and that they want to get into the game for different reasons. But it won’t be easy, partly because there’s a cultural mismatch between tech companies like Google and consumer-brand companies like Groupon.

The Groupon negotiation “shows Google’s desperation or belief that this daily … Next Page »

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

Single Page Currently on Page: 1 2 3

By posting a comment, you agree to our terms and conditions.

  • Bob shrue

    An interesting complaint about tipprs technology and how they use. It made me think twice about the service provided. Actually I’ll only use 1 of the big 3 and avoid the lessor copycats/clones like tippr. Here you go: http://short-space.blogspot.com/2010/12/tippr-backstab.html

  • http://groupbuy.com Groupbuy

    It will only be a matter of time before we see the direction that the group buy market is going. If a company can obtain the majority of available email subscriptions available in a given market, then the company will own the majority of that market, discounted for those consumers who belong to multiple daily deal sites. After all, how many can one person join and not get sick and tired of all of them?

  • http://blogs.forbes.com/quickerbettertech/2010/12/06/online-group-buyings-need-for-speed/ Leigh

    http://blogs.forbes.com/quickerbettertech/2010/12/06/online-group-buyings-need-for-speed/

    While Groupon’s strong presence in the market is impressive, it is estimated that only 15 percent of Americans are presently visiting group-buying sites. It remains very early in the game, and there is still tremendous room for consumer usage and category growth by multiple players in this space.

  • Rory

    Groupon and similar sites like LivingSocial and BuyWithMe are a very popular trend. We’ll continue to see them cropping up all over the place. The big discounts they provide on products or services are good for consumers. A great way to find the best daily deals in your area is by using http://www.shopway.com. It’s much easier than checking all those emails or sites one by one.