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Groupon is notable as a business — and entire category — built off email. But the second act for the hot daily deals space is probably mobile — and it’s clearly aiming for the fences as a next-generation search engine.
The deals juggernaut signaled that with its first significant acquisition that wasn’t about expanding geographically. It paid an undisclosed sum for Pelago, parent company of mobile location service Whirrl, which built a Foursquare-like app that allows users to form “societies” and get discounts.
Groupon CEO Andrew Mason, who reportedly spurned a $6 billion acquisition offer from Google, painted Whrrl’s strength as being the “real-world serendipitous discovery.”
“It’s about discovering what you didn’t know you didn’t know, right in your own backyard,” he wrote on the company’s blog.
With that Mason has significantly expanded Groupon’s mission far beyond a new-fangled coupon company. He’s declaring it a better, improved variation on discovering new things. Google obviously perfected discover through search. The knock on that is if you don’t know what you’re looking for, you’re unlikely to find it. Facebook has come up with the most credible alternative to this vision with its social graph. Now Groupon is establishing itself as another option tied to real world serendipity.
The deal is significant also because Whrrl was mostly a customer-retention tool. Murphys USA, for instance, used Whrrl for a loyalty program that rewarded customers with $50 of free gas based on their check-ins.
Greg Sterling, an independent analyst covering the space, said the acquisition could be part of an effort by Groupon to expand beyond merely bringing in new customers.
Whirrl said on its company blog it would close down its service following the acquisition, a sign that Groupon is more interested in the technology and talent than the service itself.
“I’m sure they also envision potential uses for the tech down the road as the product/platform evolves more into a CRM tool as well,” he said in an email.
Groupon is betting big on the release of Groupon Now, an app that has just two buttons: “I’m hungry” and “I’m bored.” While that seems straightforward enough, Groupon faces major challenges in making it work. Email distribution works because Groupon doesn’t need a huge number of deals in a geography. It features just one per email. But in mobile the equation is turned on its head. A deal for a spa in one corner of Manhattan might be OK for email, but a mobile offer has to be pinpointed within a few blocks of an urban location. That means an enormous pool of deals.
Groupon might style itself a next-gen Google but the current version is the one with relationships with millions of advertisers and deep technology in matching offers to the right user at the right time.
The second front in the deals battle will pose a challenge to Groupon from LivingSocial. It beat Groupon out with a mobile product, LivingSocial Instant. It flexed its muscles in this area with a kickoff offer this weekend of $1 for $20 of food in Washington, DC. The catch was the coupon had to be redeemed before 5pm. It sold over 30,000.
Clearly those are unsustainable promotions, but the effort showed an appetite for instant deals. Whrrl gave little indication of how it would fit with Groupon, saying only its “mission has always been to increase the possibility of adventure in our daily real-world lives.”
“The mission alignment of the two companies and the fact that we’ve taken very different approaches is a big part of what makes this marriage non-strange, and in fact, very complementary and compelling,” Pelago CEO Jeff Holden wrote on its blog. “And what made this a no-brainer was Groupon’s massive adoption and meteoric growth. The opportunity to take the collective brain power and technology of our two companies and point them at a phenomenon already at huge scale is virtually impossible to refuse.”
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