Groupon Says No to Google (Nasdaq:GOOG) Offer

All the hoopla surrounding Google's (Nasdaq:GOOG) offer to acquire Groupon may have already ended, as reports are Groupon has decided to reject Google's offer, and they possibly may be looking at an IPO of their own.

Looking for other avenues of growth in their search segment, Groupon would have been a great fit for Google, although there were some questions as to the efficacy of the deal by some, even though most thought it would be a good fit.

The problem seen was the seemingly easy commoditization of Groupon's business model, as numerous competitors have already surfaced, offering much the same service; companies like LivingSocial, Scoop St., CrowdSavings, Tippr and BloomSpot.

Depending on the structure of the deal offered by Google, some see it as a potential mistake by Groupon to reject it. It depends largely on whether or not it was an upfront cash payment, according to Forrester Research, as to whether or not the decision was a good one or not by Groupon. If it was that, then it probably was a mistake.

On the other hand, if it was a payout based on meeting performance targets and staggered, then it was probably a good decision to reject the deal.

Something Groupon needed to keep in mind was the commoditization factor. If they end up having share eaten up by competitors based on pricing and an easy-to-copy business model, there is simply no differentiation, and the value of the company could easily plummet.

For now though, Groupon is the big dog in the fight, and have about 35 million subscribers around the world, and are important if they have indeed cracked the local advertising code, something that is possible, although not quite proven yet.

One major challenge seen with Groupon is their business model as far as offering the great deals they have. It requires a large force of salespeople, something that is costly and makes it difficult to scale after a certain point; a point some think they may have already reached.

If competitors could get good deals but with less salespeople and thus lower costs, it would leave Groupon vulnerable, as mentioned above.

I think because it's Google that made the offer, Groupon may have decided to play it coy and look for a better offer from a different suitor, not that the attention is now focused on them.

For the reason stated, they have to be careful not to be too cute and wait too long if they are wanting to be acquired. If their business model comes under pressure, they could have missed out on the best opportunity they will ever have.