Friday, January 21, 2011

Are You Ready to Rumble!?! Google Offers Vs. Groupon

A Knowledge@Wharton business school article recently took a look at the merits of Groupon and deemed it to be a solid business model that has a strong foundation for the future. A blog post belonging to one the B-school classes -The Enable tech blog post - cited the fact that customer acquisition for small to medium sized businesses (SMBs) can be very expensive and that Groupon has captured the attention of so many because it is relatively less expensive than many other customer acquisition channels. They also noted one area of vulnerability for Groupon and other collective buying discount and coupon businesses is the potential for consumers to get email fatigue and start to manifest adverse selection and other negative brand effects.

With Google's announcement that Google Offers, a direct competitor to Groupon, is launching, the Media Mafia team raises the question of another potential dart being thrown at the Groupon balloon - What affect will Google Offers have on the future of Groupon?

How will such a potentially strong competitor affect Groupon's current market leadership position? Will the principles of first mover advantage and the points noted in the Wharton Enable Tech class post still hold true? Bada boom, bada bing the Media Mafia Think Tank believes it will.

Groupon has brand loyalty on both sides of the transaction - the SMBs, and the consumers. The only potential threat I see is that Google already has 8% marketshare among U.S. SMBs by way of AdSense, some SMBs could take a one-stop shop approach with Google to test and potentially combine the customer acquisition techniques to see which will yield the lowest cpa. The other metric which will then need to be considered by the SMBs will be consumer quality as measured in ARPU (average revenue per user). On the consumer side, I think Google will suffer from the "Goliath" lack of appeal, and consumers will continue to flock to the underdog. Although at today's current $50 Billion valuation, Groupon looks closer and closer to a Goliath themselves. It will be extremely interesting to watch the "Offer-based Consumer Acquisition Wars"

More op-ed on the Google Offers Vs. Groupon battle can also be found on Mashable. We dare you to go read theirs and not share ours first.

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