Google and Groupon: What Can be Learned From an ‘Absurd’ Valuation?

What does a six billion dollar transaction really tell us about our product management and marketing?

I have been tacitly following the Google / Groupon story this week and am enjoying the different takes on what it all means. I especially like the quote from Forrester Research Analyst Sucharita Mulpuru that looks like it is appearing in just about every major news outlet, “”A multibillion dollar valuation for a company that is in a business with virtually no barriers to entry and is younger than my toddler is absurd”. Ms. Mulpuru’s quote is currently playing on CNBC, the New York Times, the Wall Street Journal and a Google search of the exact quote is currently turning up 91 hits. With all due respect to Ms. Mulpuru I think she is completely off base on this, and the fact that she sees the valuation as absurd mitigates the forces that are driving the current tech wave. In fairness, her blog post on the matter does offer some sound consideration. Especially the issue of merchants not being completely sold on the concept.

Do yourself a favor and give her post a read when you get a moment. And for that matter if you have a couple of minutes on your hands read the NYT and WSJ pieces as well. Each offers decent reporting on the deal, though personally I’m preferential to how WSJ covers it as they see it in a more strategic light. But back to Ms. Mulpuru. What I think she fails to take into consideration is that if this deal does go down it is unlikely that Groupon will look the same in say 6 months time, and could possibly be unrecognizable in a year’s time. Google isn’t in the game to buy the local advertising service and accompanying software simply to trot out the existing business model, they’ll put it on steroids and inject their 100 million plus gmail users into the mix, their search mastery, and mapping capability (not to mention their geo-location service) and transform Groupon into an absolute no brainer for local businesses. And not just local businesses but big businesses looking for fresher online alternatives

My opinion on how all this is going to shake out, however, is absolutely irrelevant, and not why I took to the keyboard tonight. Rather, I think the occasion helps to point out the direction in which this technology wave is headed and proper response for those in the tech market in some way shape or form.

Ad Dollars are infinite: I had dinner over the holiday with a life long friend of mine who runs an ad agency in the Boston area. We were discussing the ongoing Facebook / Google battle and he made a pretty good point about the billions of dollars in ad revenue that is fueling this fight. Advertising is a revenue nirvana. It never goes away. In good economic times firms have plenty of money to advertise. And in the bad, while they might be forced to think smarter about their ad dollars, they feel compelled to leverage advertising investment to drive business. As web 2.0 begins to creep towards 3.0, smart phones units increase, and the biggest screen in the house (the TV) starts to connect all devices across the family to one another as well as the internet, the opportunity for advertising revenue can only increase. The take away for tech, whether established or startup, is to capitalize on the expanding opportunity to drive advertising, search results, or connect buyers to consumers.

Seek the Whitespace: One of the best sales tactics I learned while with SAP was the concept of customer whitespace. SAP has just about every kind of business application software in its toolkit. It also has a very mature install base that is running the core SAP products. The only recourse is to evaluate that install base and identify areas where ‘whitespace’ exists. Imagine a spreadsheet with a matrix of buyers and business applications. An empty cell that intersects a buyer with an application he has need for is empty. . . white. It is whitespace. The take away for tech, build in the whitespace of the leaders. What is it that Google isn’t doing? Where it is that Facebook is currently not focused? How is Microsoft’s race to the cloud prioritized? What keeps big ERP from nimbly responding to their user communities. The answers yield whitespace, and opportunity.

Position, Position, Position: I wrote the other day about the need to invest in an effort that results in words that easily communicate value to your targeted buyer. Groupon’s value pitch is ridiculously simple. For subscribers: “Groupon features a daily deal on the best stuff to do, see, eat, and buy [in your town].” For merchants: “Like new customers? You’ll Love Groupon”. The take away for tech is to immediately take inventory of how you’re positioned and how easily you are communicating your value. Seriously, is there a better motivator than to pick up the WSJ or the NYT and read about this two year old startup with about $170 million worth of funding on the block for nearly $6 billion dollars?

Change the game: Offer a completely new variation on a well established theme. The maturation of cloud computing infrastructure, and software as a service subscription models provide product managers, marketers and developers with the opportunity to rethink solutions to already solved business problems. The best example of this that I’ve come across is Prezi. Prezi is software in the cloud that completely changes the way presentations are produced. (my review and demo of the product can be found here). The take away for tech is to dedicate time to evaluate the problems you’ve been solving for maybe years and determine if they can be approached in a more innovative fashion.

Obviously the nature of your business or service dictates the action and response you are able to take in the face of this ongoing tech wave. And while only time will tell if a Google acquisition of Groupon will be successful, the lessons to be learned are worth evaluating. Do they have any impact on what you are doing with your product or service? Is your customer or client base one that would benefit from the application of these lessons? These are the questions that we need to be asking ourselves, and allowing the answers to help us to prioritize and focus.