Groupon Grows More Valuable: After Google Offer, Expansion Plan Launched

In the wake of news that Google has offered $6 billion to buy Groupon, the collective-buying site announced plans to expand its offerings.The Internet was abuzz Tuesday with reports that search engine giant Google (GOOG) had made a $6 billion offer for social buying site Groupon. The figure is two to three times higher than previously reported numbers and -- if the acquisition goes through -- it will certainly make both investors and company employees very, very rich.

Even as the rumors of the deal swirled, Groupon announced on its blog that it would dramatically expand its offerings by rolling out Groupon Stores, a new feature that allows businesses to create and launch their own deals whenever they want. Under the new program, Group will "select the best deals from Groupon Stores and match them to customers using our personalization technology. Follow any Store so you'll never miss a deal from your favorite merchant."

This is a huge deal because previously merchants had to wait months to get their Groupon offerings sent out via email due to the company's strict limitations on number of deals per day. The rationale behind this move is well explained in the post by Groupon founder and CEO Andrew Morton in the post:
"We originally designed Groupon to account for the constraints of being a small company. Since we didn't have any merchant relationships, we limited ourselves to one deal per day. Today things are different – our biggest problem is that demand is so high, merchants often wait months to be featured. And while we once only had a few thousand customers per city, now we have hundreds of thousands (Chicago just added its millionth subscriber!) – making it increasingly difficult to find one deal that satisfies everyone."
Why Groupon Stores Makes Sense

So why is this so huge? A couple of big reasons. First, this is the second half of the personalization thing and it closes the loop. Before, shoppers could get personalized offers but how good a fit those offers were might be spotty because Groupon was still offering only a few simultaneous offers.

Now, Groupon, via the Stores offering, can run loads of different offers for specific geographical areas and ensure that those offers are targeted not only to people who match them, through the company's Netflix-inspired personalization algorithm, but also through subscriptions to the specific stores.

The Stores function, too, is perfectly tailored to national chains who may want to goose sales in particular regions or spark interest in stores that had not been hitting their targets, for example -- or to raise their profile in areas of recent expansion.

In terms of allowing big nationals to regionalize, this is an expansion of a trend that has already been going on for a while. James Moran, CEO of social shopping deal aggregator Yipit, told me several weeks ago that "Groupon is quietly running regional campaigns for Hertz, Fandango and Lands End...."

Groupon will launch its first Stores in Chicago, Dallas and Seattle. What this means for Groupon competitors plying vertical niches is unclear. Groupon could easily now create vertically oriented stores. And if the Google deal happens, Groupon offers could easily populate the advertising space on Google's popular Gmail product. Can you say synergy?
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