Groupon Was Still Right in Rejecting Google

And the cheap get cheaper. Groupon (NAS: GRPN) fell to new lows this morning, as The Wall Street Journal is profiling a handful of early investors in the daily-deals leader who have dumped most of their shares.

And it's not just the early shareholders who are bailing. New retail investors also moved on after last week's dreadful quarterly report. Despite a 45% spike in year-over-year revenue growth, sequential revenue declined by 7% if you back out the company's direct revenue that's being booked through its recent Groupon Goods merchandise offerings.

Yikes!

As Groupon's market cap has cratered to $3 billion -- a shell of its $12 billion price tag when it went public late last year -- it's getting popular to criticize Groupon for passing on what now seems like a very generous Google (NAS: GOOG) buyout offer.

Neither company ever confirmed the chatter, but it's been widely reported that Yahoo! (NAS: YHOO) and Google approached Groupon with outright acquisition proposals two years ago. Google came the closest to sealing the deal, offering to shell out roughly $6 billion for the company. The potential pairing came undone when Google balked at Groupon's request for a seven-figure breakup fee.

It's easy to blast Groupon. It's also a sobering contrast that Groupon's hitting a new low today just as Google is striking a four-year high. However, let's not gloss over the reason Groupon was holding out for a beefy penalty if the deal fell apart. Regulators would have taken a long time to review the acquisition, and antitrust regulators probably wouldn't have agreed to let the world's largest online advertising company grab the world's largest daily-deals leader.

Google has proved to be a good owner. YouTube has flourished under its watch. But the months of uncertainty as regulators weighed the decision could've been brutal. It took them nearly a year to clear Google's purchase of a much smaller travel software company.

Living Social, backed by Amazon.com (NAS: AMZN) , would've had a golden opportunity to gain market leadership in the meantime. Groupon merchants also may have been hesitant to throw more money in Google's direction, and deal seekers may have been confused.

If the deal had been nixed, Groupon would've been in an even weaker position today. Yes, Groupon's flawed. The model's a mess. However, using Google as an exit strategy was never as viable an option as many people reflecting back on the situation today make it seem.

What a deal
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