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Groupon Software: Why Google Wanted It

December 15th, 2010

groupon softwareWhy did Google think Goupon was worth $6 billion? That was a question a friend of mine — a Boston University and Harvard graduate in business — posed on his Facebook page once the news of the offer broke.

Here’s the value: The data.

As Search Engine Journal notes (in perhaps-frightening detail), Google’s main purpose is to collect your consumer data. Every thing that you do on any Google platform — Gmail for personal e-mail, Google Documents for work, the Android for mobile communication, Adwords for SEO-keyword research, Google TV for entertainment, searches performed on Google itself, and so on — is recorded by Google because all of your Accounts, Profiles, and data are interconnected and shared via the digital “cloud.” Most people may not realize this business truth, and even those who know do not mind because Google’s interconnected platforms are so efficient and useful.

Google, of course, can take pride in developing the best search-engine over the past ten year or so, but free search does not pay the bills — that’s the purpose of the Google Ads that appear in search results and across the Internet. As I noted in a prior post on how SEO, SMM, and social-media guidelines changed advertising, the nature of marketing underwent a fundamental change in the Internet Age. Rather than being passive blocks of images and text that were placed in newspapers and televisions geared towards population segments, advertisements became geared specifically towards individuals.

How Groupon Software is Valuable

Say that your company sells diamonds. An advertisement in the Boston Globe may reach the 1% of the general population in Massachusetts that is interested in diamonds. More than 50% of the people reading a jewelry magazine will be interested in diamonds (as opposed to rubies, emeralds, and so on). But a Google advertisement that appears only to users searching for “diamonds” will have an audience of whom nearly 100% will be interested. Which option is the most efficient for a diamond company?

By creating the Google Ads platform, Google has created an advertising business that delivers the best results for advertisers. And by collecting as much user data as possible, Google can increasingly tailor and customize the advertisements that appear to each individual person in the world.

But, of course, Google Adwords is not perfect. (Nothing is.) For example, I am an American Israeli who lives in Jerusalem and works mainly in English. But roughly half of the advertisements that Google still delivers to my browser are in Hebrew and Russian (there are many Russians in Israel) despite the fact that everything I write on Google platforms is in English. Google, it seems, is giving a high weight to the location of my ISP here in Jerusalem. (Which makes me wonder why I never see advertisements in Arabic as well as understand why most of the ads are for SEO-software companies and online-marketing services.)

Every advertisement that appears to me in Hebrew and Russian is wasted space because the former is my second language, and I do not know the latter at all. It’s an inefficiency in the system. Obviously, Google needs further help with tailoring its advertisements to individuals — particularly in a flat, globalized world.

And that is where Groupon could have come in handy because the company’s vast amounts of localized, personalized data would further increase the accuracy of Google’s user profiles. Currently, the Google Adwords system tailors advertisements based on what the web user may like — Groupon’s data would tell Google what the user has already bought locally.

If Google knew my activity in GroopBy — the Israeli version of Groupon for English-speakers in Israel — then advertisements in Hebrew and Russian would likely stop appearing. (GroopBy seems to be unaffiliated with Groupon — kudos to the business people who took the ingenious idea to Israel.) In other words, the acquisition of Groupon would tell Google not what individuals may buy but what they have already bought.

One cannot put a price tag on the value of that information to advertisers and SEO-focused websites. But perhaps it is indeed $6 billion. So, it is easy to understand why Google wanted to acquire Groopon. A better question is, why did Groupon refuse the offer? That’s what is really intriguing.

Related: Is Google a Monopoly?

Samuel J. Scott, a former journalist in Boston turned Internet marketer in Israel, is the founder and publisher of My SEO Software and Director of Digital Marketing and Communications and SEO Team Leader at The Cline Group. You can follow him at Google+, LinkedIn, Facebook, and Twitter. His views here and elsewhere do not necessarily reflect those of his company and clients.