Groupon recently turned down an influx of acquisition offers, opting instead for further financing from private investor companies.
Groupon, the company that uses collective buying power to offer discount prices on local daily deals in cities around the world has just received US$ 950 million in financing from an agglomeration of investors. This announcement comes just weeks after Groupon turned down an astonishing US$ 5.3 acquisition deal from Google.
Google’s heavy interest in the two-year old company was so intense that it was willing to pay twice as much as for Groupon than its largest acquisition to date. Google’s interest stemmed from its desire to acquire Groupon’s greatest asset: Local advertisers. Groupon has managed to create an unparalleled distribution network built on its relationships with thousands of local businesses in hundreds of metropolitan areas. Groupon’s business model is rumored to have resulted in over US$ 500 million in revenue in 2010. Groupon is the dominant player in a market shared by Foursquare, Facebook and numerous others: None of which have yet managed to figure out a business formula to match Groupon’s success. Google was hoping to acquire Groupon in order to increase its local advertising revenue to a new level. If the deal would have panned out, Google would have gained the upper hand in local business advertising.
Yahoo also made an attempt to purchase Groupon earlier in 2010 but failed. Groupon has instead opted to exercise other options of fund raising. The reported US$ 950 million in financing in Groupon, the company Forbes Magazine labeled “the fastest growing company ever,” comes from an array of investors such as: Mail.Ru Group, Maverick Capital, Andreessen Horowitz, Greylock Partners, Silver Lake, Technology Crossover Ventures, Battery Ventures and Kleiner Perkins Caulfield & Byers.
Groupon intends to utilize the funding to fuel global expansion, among other things. In 2010 Groupon already achieved market expansion from 1 to 35 countries, increased its presence from 30 to nearly 500 markets, grew its subscription base from 2 to 50 million, saved consumers over US$ 1.5 billion and worked with over 58,000 local businesses.
As opposed to internationalization, inward market segmentation is also evidently a priority of Groupon’s. In markets such as Washington DC, New York City, L.A. and Chicago, Groupon has begun offering hyper local discounts. In these markets, Groupon has taken its local approach to connecting with individuals down to the neighborhood level. Groupon targets individuals with hyper local daily deals from local businesses depending on which Wi-Fi networks their laptops, iPads, and mobile phones are most often connected to. Another option for consumers in these large urban areas will be to choose from which region of the city they would like to see the majority of featured deals.
Groupon will use the remaining funds to invest in technology and provide liquidity for employees and early investors in the company.
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