Google gears up for battle with Groupon

The Dealmap and its 2 million-plus users are acquired by Google as it builds a daily-deals business

Google has inked a deal to buy The Dealmap as it looks to bolster its local deals business.

The move may not be good news for Groupon, a highly popular deal-of-the-day company that focuses on local markets.

Groupon has seen increasing competition from the likes of Google and Facebook in recent months.

The Dealmap, a location-based deals service that's a little more than a year old, disclosed the deal this week but wouldn't reveal financial details.

"Since launching The Dealmap in May 2010, our team has worked to build a great product where people can find and share all the best local deals, all in one place," the company said in a blog post announcing the deal.

"In our first year alone, The Dealmap grew to more than two million users of our Web, mobile, social and email products, and more than 85 million monthly visitors to our partner network. The journey that has led to this outcome has been an invigorating and rewarding one," the company added.

For now, The Dealmap will continue supporting the company's core products and partner services. Users will still be able to access local and daily deals through the company's Web site, mobile apps and daily email, it said.

The acquisition neatly fits into Google's plan to move into the daily-deal business, said Dan Olds, an analyst with The Gabriel Consulting Group.

In April, Google launched a beta test of Google Offers, which could compete head-to-head with Groupon. Google kicked off its Google Offers coupon service in the Portland, Ore., area.

Much like Groupon, Google Offers is designed to send people who sign up for the service daily discounts for local restaurants, services and attractions.

A week after the unveiling of Google Offers, Facebook launched its Deals on Facebook service, which is designed to help users find discounts on local activities like concerts or hot air balloon rides. Deals on Facebook users can sign up for email notifications of coming deals or they can click on the Deals tab on their own Facebook homepage to see what's available at the time.

"There's obviously big business in providing a mechanism that connects users to deals in their local cities," said Olds. "Google tried to buy Groupon last year to get in on this fast growing segment. When Groupon denied them, they built Google Offers. Buying The DealMap is a good move in that it brings a built-in installed base of more than 2 million users."

Google's move could prove a problem for Groupon.

"Google is likely to go after this market with gusto. With the addition of The Dealmap staff, they now have experienced people who have already been slugging it out with Groupon on a daily basis," he said. "Now the team has the resources and weight of Google behind them, which is going to make it much easier for them to sell against Groupon."

Rob Enderle, an analyst with the Enderle Group, noted that the Google acquisition comes just a few months after Groupon announced plans for an IPO it hopes can raise about $750 million.

"This could frighten investors, dramatically reducing what Groupon can raise in the stock market," added Enderle. "As for Google, it will turn them into more of a retailer over time and allow them to capture more of the available revenue."

Olds noted that The Dealmap gives Google the pieces it needs to fully engage in a "head-to-head battle with Groupon."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

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