What if Google’s hunger to buy Groupon isn’t really about Groupon? Let’s think of the rumored deal as a $6 billion weapon for Google’s current and future war against Facebook.
Increasingly the two giants are fishing in the same ponds. Google recently started to offer local businesses an opportunity to pitch deals to users of Google search. Facebook this month launched an initiative it calls “Deals,” to offer discounts to Facebook users in the vicinity of local stores. (Sound familiar? Yup, these are just like Groupon.)
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- Google v. Facebook: Who will land the knockout punch?
Facebook just weeks ago launched a messaging service –- don’t call it email, Mark Zuckerberg says –- that competes with Google’s Gmail. Google is working on its own social-networking features and games that could rival how Facebook users spend their downtime. And increasingly, Facebook and Google are competing in the same talent pool. The New York Times reported in recent days that at least 142 Facebook employees (out of 1,700) are ex-Googlers.
The battle is over how people spend time on the Web – on Google sites such as YouTube, Gmail and Google News, or on Facebook? Google’s websites in October lured 181 million unique visitors, according to comScore, good for the No. 1 ranking in the country. Facebook was fourth at 151 million, behind Yahoo and Microsoft but closing quickly. While more people visit Google, people are spending more time on Facebook than on Google’s sites. Think of how much time you waste playing Scrabble or scouring your friends’ profiles for the latest baby photos.
With every click on Google or alternatively on Facebook, the companies get a chance to grab a bigger slice of the $26 billion annual pie for online advertising. Google for now is king of search ads, but Facebook is responsible for one out of every four graphical display ads across the Web. Google’s share is 2.7% in display ads.
Mobile advertising and the local arena are the next battle fronts. Research firm Borrell Associates estimates U.S. local businesses will spend $13.6 billion this year on online ads. Facebook encourages local businesses to set up Facebook pages and target ads – for example, wedding photographers can direct ads at young women who recently changed their relationship status on Facebook to “engaged.” Groupon and its ties with merchants may give Google a leg up with local businesses, at least until the next round of armaments.
“We believe that Google and Facebook will be battling for Web supremacy for years to come,” Wedbush said in a research note this week. “The purchase of Groupon would be another major piece of artillery for Google to use in this battle.”
The Google-Facebook war at its core isn’t about ad money, eyeballs or the rights to the King of Silicon Valley throne. It’s about bytes. The magic of Google’s $180 billion market value is its mastery of the reams of information about what people are looking for across the Web. The more clicks Google gets on its blue links, the smarter and more powerful the Google machine becomes. Facebook’s machine is grabbing at user data directly –- by inducing people to list their friends, hobbies, favorite movies and hometowns.
There’s even a precedent for Google using acquisitions as battle gear. Last year, Google announced a deal for AdMob, to help seed ads on cell phones and other mobile devices. That deal, of course, was a broadside against Google’s other BFFN (Best Friend Forever. Not): Apple.
http://blogs.wsj.com/deals/2010/11/30/groupon-more-anti-facebook-armor-for-google/
