Update: Groupon has reportedly rejected Google's offer.
There's a reason why Google is going after Groupon as opposed to one of its competitors. Not only is it the leader in its space, it's the leader in its space by a long shot. Experian Hitwise has shared some data comparing market share of visits of Group Coupon Sites, and Groupon is way ahead of its closest competitor, LivingSocial.
A Google acquisition could make Groupon's market share skyrocket even more, though LivingSocial just got a nice infusion of cash from the biggest retailer on the web. LivingSocial announced a $175 Million Investment by Amazon, as well as an additional $8 million investment from Lightspeed Venture Partners.
The company says it will use the investment to maintain a "steady drumbeat of worldwide launches and overall business growth". LivingSocial already has over 10 million subscribers in the US, Canada, UK, Ireland, and Australia.
"To be the biggest player in the local commerce space there is no one better to work with than Amazon," said LivingSocial CEO Tim O'Shaughnessy. "As the social shopping space continues to heat up, LivingSocial is committed to staying focused on providing the high level of quality that consumers and merchants have come to expect when working with us."
Along with the above chart, Experian Hitwise shared the following information:
- Groupon.com received 79% of US visits last week and Living Social received 8% among a custom category of 81 Group Buying sites last week
- First, (the site) appeared in Spring of this year, that Living Social's visit growth would make it a viable threat to Groupon. As the chart denotes, that growth-spurt was very short lived.
- Second, if we look at the graph's end-point, Living Social's market-share is almost an order of magnitude lower than Groupon's.
- So one-tenth of $6 billion dollars (Groupon's valuation) is less than Living Social's projected valuation. Of course traffic to valuation is a gross over-simplification. Perhaps Living Social's audience composition would validate a higher value.
- The main difference between the two audiences, is that Groupon has clearly "crossed the chasm" in Geoffrey Moore speak, with strong showings in types like Mosaic type C02 - Prime Middle America. Probably the most interesting difference is the percentage of Young Cosmopolitans - type H01 that are frequenting LivingSocial.
- From prior analysis we know that Young Cosmos are one [of] the strongest early adopter segments. Despite the very unimpressive traffic numbers, perhaps Amazon is recognizing the potential for LivingSocial to move beyond its current early adopter phase.
Both Groupon and LivingSocial will have plenty of competition to deal with moving forward as this space is getting incredibly hot. If Google buys Groupon, it will have a clear advantage over the rest, however (even more so than it already does), with Google's new overall focus on local and social. Amazon is very powerful though, so that should be huge for LivingSocial.