Google-Groupon Faceoff: Google Daily Deals Enter The Arena As Other Social Media Backs Off

September 2nd, 2011 by Search Influence Alumni

Just four months after jumping into the daily deals pool, Facebook abandoned its efforts with regard to small business space (at least those not related to check-in services). Given that the business in question had to have a Facebook profile and only about 15% of the average business’ fans are located in the same city as the business itself, it makes sense that the social media giant would turn its focus toward more profitable venues — eliminating its Groupon competitor while reducing its lame-duck Foursquare competitor to a sideline project. Hot on the heels of this news, however, comes the announcement from local-focused entity Yelp that their daily deal program will be severely scaled back, and that “we’ll continue to email out any amazing Deals we find; rest assured when it comes to quality vs quantity, we’ll choose quality every time.”

While Yelp isn’t on the same scale as the ‘book as far as user base or diversification of services, it is by nature a very local presence, making the small-biz deal model a seemingly natural fit. However, Yelp CEO Jeremy Stoppelman has stated concerns with the “deep discount” approach that has provided an extremely negative experience for many small-scale businesses, leaving nobody happy in the end via use of an unsustainable model — albeit one with considerable consumer response. However, despite the reputational backlash growing from the business end, Groupon has reported record profits and its name has even been bandied about as the fastest-growing company ever. While long-term results are as of yet unproven and more merchant-friendly policies seem inevitably necessary to keep the brand afloat, it’s certainly hard to argue with the numbers at the moment.

So why, with other social web presences getting washed out of the pool by Groupon’s leviathan-scale belly flop, is Google dipping a toe in? The search behemoth has established a deals program in Portland, OR and seems to be looking to expand, given its recent display of a New York-based deal on admission to the Museum of Natural History. I guess the saying goes that if you can’t beat ’em, attempt to acquire them for $6 billion and if that doesn’t work, well, go back to trying to beat them.

Part of this is almost certainly to do with timing, as Groupon recently filed for an IPO that could happen as soon as next month, launching it as a publicly-traded company and opening up an entire new world of earning potential. Its unprecedented fast-track growth also offers significant incentive to mount a counter-campaign and nip the competition in the bud before it grows to Death Star-like proportions. El Goog is facing an uphill battle, given that it’s moving against some pretty entrenched competitors — but at the company’s current scale it wouldn’t have much trouble deploying a nuclear bomb to swat a fly. There’s no clear path to adoption for users (certainly nothing as convenient and reliable as an email plunking into one’s mailbox every morning) and no real incentive to sign on when faced with the plethora of other, more popular options, at least for the moment. However, the sheer number of eyeballs (particularly if location-targeted deals are to be featured on Google’s famously minimalist home page) is a force to be reckoned with in and of itself. (In fact, a Piper Jaffray analyst estimated the Nexus One placement on the Google home page to be worth between $4 and $5 million if it were a bought-and-paid-for ad.)

The Google brand, for better or for worse, has a lot of leverage with consumers and products that gain popularity tend to stick around for the long haul. The company also seems to have wider ambitions with its deal models, tying the Offers brand up with Google Wallet and check-ins, as well as developing Google Offer ads and coupons that can be displayed along regular PPC content. While Groupon is currently mobile-accessible, the all-in-one convenience of Google Wallet could be a strong selling point to those who want all their resources and grabs in one place. It’s clear that with the resources at their fingertips the success of Google’s deals platform isn’t contingent simply upon the “daily deals” Groupon-like aspect; however, it remains to be seen whether the attempt at diversification will pay off or Groupon’s 115 million users will stay true to the service that’s provided staggering discounts for its duration as an entity.