Rumor: Google buying deals service Groupon for $2.5 billion

Nov 29, 2010

It’s still unconfirmed at this point, but tech news site is reporting that Google (GOOG) has spent $2.5 billion to acquire Groupon.

Rumors about the buyout have been flying around for days now, since before the Thanksgiving holiday, with the price hovering somewhere between $2 and $3 billion for Google. Before that, Groupon was reportedly fielding offers from Yahoo! (YHOO) as well, which were supposedly as high as nearly $4 billion. That followed reports from All Things D from earlier this year that said Groupon turned down a $1.7 billion offer from Yahoo!

There’s a reason Groupon turned down the $1.7 billion offer — it’s worth a lot. The company focuses on more than 70 different markets in the U.S., where it partners up with businesses to offer deep discounts in the form of coupons to its subscribers. Subscribers then pass the deal around and get others to agree to go in on it, and once a minimum number of people have signed on, the deal gets offered to everyone and the coupons become valid. A new offer for a new business shows up in users’ email every day: sometimes you’ll get coupons for pedicures, other times for skydiving, but the deals are always pretty great, and the service usually highlights businesses many customers might not know existed. Groupon has about 20 million subscribers and a presence in 29 countries.

The company released an iPhone app earlier this year that helps customers save even more and knocks out the need for printing the “groupons” they receive. The app also lets users keep track of their groupons by location and expiration date, freeing up the ability to plan on the fly where to go if you have access to a deal. Groupon for iPhone is free and pretty handy, and its popularity has probably helped the service on its path to success.

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Groupon has only been around since 2008, but has reportedly been pulling in revenue of more than $50 million a month. It had a valuation of $1 billion in April, and that’s been rising ever since. Up to now, the company has resisted buyout offers from several other companies, including eBay (EBAY). But Groupon did partner with eBay for some user-specific sales that earned them rewards through the auction site.

Linked up with Google, Groupon will likely be fused with the company’s Google Places service, a directory of local businesses. That would strengthen both companies considerably, one assumes, by giving Groupon the ability to access more businesses and create more deals, while Google can use Groupon’s success to bring more businesses into its Places fold.

Meanwhile, iPhone-owning Groupon users probably won’t see any immediate effects if Google does acquire the company, although the Apple-Google relationship has been strained lately, to say the least. According to SlashGear, Apple (AAPL) bounced an app from the App Store that was essentially a digital magazine about Google’s Android operating system. And Apple only allowed Google Voice a place in the App Store after the federal government started asking questions.

So for the at least 30,500 or so Groupon on iPhone users — don’t expect drastic changes if Google acquires Groupon, but don’t expect Apple to be exactly cooperative in the app’s future, either.

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Phil Hornshaw

Phil Hornshaw is a freelance writer, editor and author living in Los Angeles, dividing his time between playing video games, playing video games on his cell phone, and writing about playing video games. He’s also the co-author of So You Created a Wormhole: The Time Traveler’s Guide to Time Travel, which attempts to mix time travel pop culture with some semblance of science, as well as tips on the appropriate means of riding dinosaurs. Check out his profile.

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