Is Google Offers Too Late to Compete? [Update]
Posted by Michael Dossett
[UPDATE: 4/21/11] In the four months since Google’s failed $6 billion Groupon acquisition bid, the company has faced increasingly vocal criticism on everything from lack of innovation to weak leadership. Today Google launched sign-up pages for its very own Groupon clone, Google Offers.
Following the company’s release of Google +1, this release will do little to calm the fears that Google is resorting to a “copy-cat” strategy as it falls further behind in social and perhaps is even losing its dominance in search. Further hampering Google’s progress is Groupon’s poaching of Google VP of Sales Operations Margo Georgiadis to fill the role of COO. With virtually zero differentiation in the company’s plunge into local deals, what makes Google believe it can compete with established heavyweights like Groupon and LivingSocial?
More than a month after Groupon spurned a $6 billion acquisition offer from Google, the worldwide search engine leader is preparing to announce its own local deals service, Google Offers. According to Mashable, “Google will pay out 80% of a business’ revenue share three days after its deal runs. Google will hold the remaining 20% for 60 days to cover refunds before sending the rest.”
Groupon holds a dominant share of the local deals market, with LivingSocial trailing in a distant second and dozens of clones controlling minuscule shares. Reports of a similar service from Facebook have surfaced recently, and with Groupon supposedly preparing for a $15 billion IPO, questions are arising whether the market is saturated and if it can sustain another large competitor this late in the cycle.
The local deals market is by no means mature, and traditional marketing laws call for a strong number one versus number two competition over the long run, but the rules of Silicon Valley reward the first market entrants above all else. So with an established leader in Groupon controlling a heavy share and runner-up LivingSocial fresh off their blowout Amazon deal (which garnered over one million downloads), is Google Offers too late?
With little room for differentiation in the basic deals platform, Google’s opportunity to steal share from Groupon lies in its ability to integrate search, social, maps and location, and capitalize on the power of its online reach under the rejiggered executive management team led by some familiar faces. Pre-loaded mobile applications on its Android platforms and packaged search and local deals are likely components of Google’s strategic plan. It will take time to build these features out, but perhaps more than any time in the company’s history since its IPO, this is a critical inflection point for Google.
Google’s official response to a Mashable inquiry reveals the early development efforts of Offers:
“Google is communicating with small businesses to enlist their support and participation in a test of a pre-paid offers/vouchers program. This initiative is part of an ongoing effort at Google to make new products, such as the recent Offer Ads beta, that connect businesses with customers in new ways. We do not have more details to share at this time, but will keep you posted.”
The potential viability of Offers is a snapshot into the current environment at the still highly regarded online behemoth. It is widely known that more than 90% of Google’s revenues come from search engine advertising, and a recent string of disappointing product failures has some industry insiders questioning the company’s ability to create new and sustainable innovations.
After announcing a record-breaking quarter, with profits jumping to $2.5 billion, Google is hardly faltering. Google’s efforts in display advertising and mobile are paying off, and search is as powerful as ever. But with news that Eric Schmidt will step down on April 4th and co-founder Larry Page will take over as CEO, investors and insiders will be keeping a close eye on Google over the next year. As one blogger questioned, will Page’s return to the helm be similar to Steve Jobs’ triumphant reclamation of the Apple throne in 1997, or more like Jerry Yang’s short-lived return to Yahoo! in 2007?
Image Credit: Mashable