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Google turns its local eyes to Groupon

Sources tell AllThingsD that the search titan is in discussions pointing toward a possible acquisition of local-deals powerhouse Groupon, though hardly at a discount.

According to multiple sources close to the situation, Google is in discussions with local-deals powerhouse Groupon about buying it.

Without making the requisite joke about the deal of the day, sources said the price being considered is certainly no discount-well above the $2 billion to $3 billion that Yahoo offered Groupon in acquisition talks that took place earlier this year.

But sources cautioned that the talks are not complete, and could also end up without any result, as the Yahoo discussions did.

In an e-mail, a Google spokesperson said with some style: "Per usual, we don't comment on rumor or speculation. If we did we'd be busy 24/7!"

A Groupon spokesperson was also sassy, noting: "Thanks for the heads up!"

Still, the company appears to be engaged in a pattern of shopping itself around, via its bankers Allen & Co., even though Groupon investors have expressed a desire to stay independent many times.

But could there be other interested parties poking around, given the explosive revenue growth of Groupon-whose revenues are reportedly upwards of $50 million a month-in the huge local retail market?

Sources said only three could pay such a high price: Microsoft, Amazon and, perhaps the most logical buyer, eBay.

As does Google, all have more than enough cash reserves, as well as stock, to pay up for one of the more promising start-ups in a lucrative arena. That would be local commerce. Currently, despite a plethora of clones, Groupon dominates socially fueled couponing across cities globally.

Owning the hot space around local purchasing and consumer information, combined with social element, would be a tasty treat for Google. The Silicon Valley search giant has struggled to deliver social tools to users, even as social networking giant Facebook has morphed into a potent rival.

Wheeling and dealing
Google had looked at social reviews site Yelp for purchase previously, but that deal fell apart.

It has been introducing various local advertising and commerce efforts, efforts that would be turbocharged given Groupon's quick progress.

In April, Groupon garnered a valuation of well above $1 billion in a massive venture funding. It has used that money to buy up companies in the U.S. and internationally, trying to solidify itself as the major player in the marketplace.

If Google were to complete a deal to buy Groupon, it would have echoes of its purchase of YouTube in 2006 for $1.6 billion. Many felt it a high price at the time, but it looks cheap today given how the site almost completely dominates Web video.

A purchase this size would also likely require bankers. Google's favored one is Morgan Stanley.

But there is one major issue in a possible Google purchase of Groupon: Even more regulatory scrutiny by the federal government over its power online.

Google nearly missed getting approval for its $750 million purchase of mobile advertising start-up adMob.

And it is currently under fire from numerous critics for its proposed purchase of huge flight data firm ITA Software for $700 million. Those opposed to the acquisition, on antitrust grounds, contend that Google would control travel search in a way that would invite abuse.

Having Groupon would garner Google even more powerful pricing information from both customers and merchants across the globe.

Stay tuned, but check out this video interview I did with Groupon founder and CEO Andrew Mason this summer in Vancouver, where I asked him specifically about Google interest (actually, I suggested he mug Google co-founder Larry Page):

Please see this disclosure related to me and Google.