Google Offers Groupon a Run for Its Money

Not long ago, Groupon said “no” to Google’s buy offer. So Google has decided to create its own coupon program and is moving forward with Google Offers.

Google almost always gets its way. Google Video was the company’s response to YouTube, which Google eventually purchased in 2006. The company’s philosophy seems to be “if you can’t buy it — create your own and compete against it.”

Google Offers will look and function much like Groupon. Google will work with businesses on promotional deals and email a new offer daily to customers — basically the same business model as Groupon.

Customers Win

“Google is communicating with small businesses to enlist their support and participation in a test of a prepaid offers/vouchers program,” Google spokesperson Nate Tyler told the E-Commerce Times. “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.”

A new competitor in the daily deals arena will likely be a boon for customers. The coupon companies will have to provide better consumer incentives in order to stay afloat.

This is just the latest in a slew of projects Google has launched recently to develop e-commerce services.

Worth a Try for Google

Google is large enough to test new products without sweating over the possibility of failure.

“I think it is logical for them to experiment with this kind of service,” Azita Arvani, principal of the Arvani Group, told the E-Commerce Times. “If they succeed, it will be a big add-on service for local businesses. If it doesn’t succeed, it will not be a big deal.”

Even though Google enters this market as a major player, the company still has an upward swim against established players.

“However, Google Offers will loom as a big threat to Groupon, LivingSocial, and others in that space,” Arvani said. “Google can certainly bring massive scale to this kind of service. The question will be this: How much stickiness and loyalty have Groupon-like companies cultivated with businesses and their users, such that they will stick with them and not move to Google Offers? Have they created enough lead time that Google will not be able to catch up?”

While Google usually has a knack for connecting people, the company’s entry into social networking — Orkut — failed to draw significant users in the U.S.

“Some draw parallels between Google Offers and Orkut,” Arvani said, “but I would argue that social media and community building is much stickier than having people sign up for email coupons.”

Google’s Endless Expansion

While Groupon has ramped steeply with its daily coupon model, for Google, the play will be just another notch on its e-commerce belt.

“It’s really just a move to expand Google’s presence in Internet commerce, something that is ruled by other Internet giants like Amazon and Wal-Mart,” Jim McGregor, chief technology strategist for In-Stat, told the E-Commerce Times. “Combined with Google’s other offerings, a daily deal program might also be a valuable tool to help Google expand in the area of social networking.”

Google’s major innovation was tying advertising to search. After that smashing success, growth will likely come by commandeering the innovations of others.

“With the Internet, you need to constantly look at what’s new and hot,” said McGregor. “And there is not anyone who can predict what that will be. So, you look for the innovators that just happen to strike gold.”