Question: Why would a 29 year old entrepreneur turn down an offer of almost $6 billion dollars for his 2 year old company?
The news hit today that talks between Internet behemoth Google and their latest tech-crush Groupon have broken down and the two companies will be going their own way.
I’ve been reading a lot of the comments people have been leaving, and many of them come down to this, “Groupon is greedy, they should have taken the deal.”
Answer: I think it was a smart move for a couple of reasons, but mostly because Groupon is still growing. This past weekend I was talking to a young 20something retail clerk in a jewelry store and mentioned Groupon, she had never heard of it. She asked her co-worker who also hadn’t heard of it. When I told them a little bit about it, they both said they were going to sign up.
There’s talk that Groupon may offer an IPO in 2011, I would imagine that will bring in a fair amount.
Reports have surfaced that the revenue stream at Groupon this year will be closer to $2 billion not the $500 million originally reported.
Sometimes history shows us that holding on to your baby and nurturing it through the “cool new toy” stage can be the right decision. Larry Page and Sergey Brin tried to sell their search engine (Google) to the then search leader (Excite) in 1999 for $1 million. Excite passed on the deal. Facebook turned away lots of deals, including $1.5 billion from Viacom in 2006, Google and Microsoft’s $15 billion bid in 2007.
Groupon is hanging out in a nice part of town right now. Location based apps are super hot, local in general is also super hot. The ability to reach people who are looking for specific deals at a certain time is basically the holy grail for marketers.
I’m starting to think that $6 billion was nowhere near enough to offer. Andrew Mason and his board of directors made a smart decision.