“Zagat gives Google quality reviews to fuel business listings through Google Places,” said Aaron Goldman, Kenshoo CMO. “Professional reviews, rather than biased reviews from families of restaurant owners or competitors that weaken the signal from other review sites, is what differentiates Zagat.”
Google’s in the business of organizing (and monetizing) all the world’s information. Zagat’s content is very valuable information for restaurant seekers. Local and mobile search queries are becoming more and more prevalent. So what better way for Google to improve (and monetize) its local restaurant information than by buying a company that has developed a means to continually provide it?
The bottom line is Joe Searcher doesn’t care if Google is biased. Joe Searcher has come to learn (and trust) that Google will find the best and most relevant information for each query. Joe also doesn’t care how Google gets the information. In fact, Joe might prefer Google to be biased if it means it can give him the best and most relevant information.
This isn’t about journalism or publishing. This isn’t about church and state. This is about needs and fulfillment. Supply and demand. Once again, Google is well-positioned at the intersection. And it will continue to zig-zag along the way.
Yesterday, in my post “On Groupon and Google,” I derided Groupon as nothing more than a “COUPON WEBSITE.”
I was being dramatic to make the point that, if it wanted to, Google could quickly and effectively build something of similar scale to Groupon.
That’s not to say that Groupon itself isn’t incredibly valuable. And might even be worth $5-6 billion. Here’s why:
1. Brand recognition. Groupon is the Google of the deals space. When Groupon calls, merchants answer. And when Groupon emails, consumers open.
2. Relationships with merchants. Small/medium-sized (SMB) businesses in cities around the world look to Groupon as a shot in the arm for sales. Not unlike how they looked at Google a few years ago. The problem, of course, for SMBs is that Google taps out once all the relevant queries are tapped and bids get too high.
3. Relationships with consumers. Every day, Groupon sends me an email. And every day I look at it. I can’t think of many other brands I have that frequent interaction with.
4. Data. Groupon is sitting on a treasure trove of data. What offers people like. What offers YOU like. What price points make a deal tip. There are tons of companies that could monetize the heck out of this.
5. Revenue. Rumors are Groupon is doing anywhere from $800 million to $2 billion in annual revenue. That’s pretty easy to value.
Clearly, Groupon has built a fantastic company with tremendous value. But, as any entrepreneur knows, one of the keys to success is defensibility of the business model. And, as I pointed out yesterday, I’m not sure how defensible Groupon is… at least not when it has companies like Google keen on getting into its space. That’s why if I were Andrew Mason, I’d be getting mine while the getting’s good.
I mean, c’mon now, we’re talking about a COUPON WEBSITE here!
As for what Google wanted with Groupon?
1. Something more than AdWords to offer SMBs and increase share-of-wallet. After all, there are only SO many people Googling “Dry Cleaners 60622.”
2. A big honking opt-in mailing list to have deeper commerce touchpoints with consumers than fleeting search queries. (Botiques.com is another example of this.)
I have to believe Google could build these things itself.
1. Hire a bunch of freelance salespeople (or buy a Yellow Pages company) and get in front of SMBs with offers to run Groupon-esque deals.
2. Launch Google Deals and send an email to every Gmail user with the opportunity to opt-in.
If it only took Groupon a couple years to scale sales and stimulate demand, I bet Google could do it in one.
There you have it.
Eric, Sergey and Larry – if you’re reading this, that’ll be $5.4 billion, please.
Update: To be clear, I’m not saying Groupon isn’t worth $5-6 billion. I’m just saying Google shouldn’t pay that much for it because it can build something of similar scale itself. Perhaps I should’ve changed my second line to, “I think Google was NUTS to offer $5-6 million for Groupon.” Lest you think I’m not a big Groupon fan and believer, please see my follow-up post, “Why Groupon Matters.”
Through some investigative reporting, Laurie Sullivan of MediaPost, uncovered a few flaws in the new Facebook Places feature — namely, the ability to check-in from as far as 800 meters away from a location as well as check other people in with you.
Indeed, Facebook had to launch a location-based check-in feature asap to combat the growth of Foursquare. With Twitter, Facebook waited too long to change its status update call-to-action, “What are you doing?” to “What’s on your mind.” In the process, Twitter reached significant and sustainable scale.
Facebook won’t make that mistake again and, to be sure, the flaws with Places are relatively minor and (will be) easily corrected.
Copyright 2010 by Aaron Goldman and McGraw-Hill. All rights reserved. All other trademarks and copyrights are the property of their respective holders. Note: neither this book nor the author is affiliated with Google.
Join the e-mail list. Don't worry, you won't be spammed. That's another lesson learned from Google.