Google (Nasdaq:GOOG) is leading the next wave of the tech revolution and sitting on a mountain of cash. While the company has done an excellent job growing lines of business like Android, it has often struggled to push through large strategic acquisitions (with the exception of YouTube) that have contributed heavily to revenues. Groupon was the company’s latest stab, but like a growing list of others before them the company said ‘thanks, but no thanks.’
When the figure was first mooted for the proposed takeover, it seemed high. The web is now populated with hundreds of daily deal services, why couldn’t the Google brand be leveraged into its own, say, Googlepon. New websites have popped up and almost every consumer-driven website out there today either has, or has plans to roll out, their own answer to Groupon. With the proposed deal, Google was essentially willing to pay $6 billion for 1) the leading daily deals brand name, 3) a top-notch sales team, and 3) contact information for millions of deal seekers. Google stock traded sharply lower last week as investors shared my perception that the deal as too rich, making Groupon’s rebuttal somewhat ironic.
With that fat wad of cash still burning a hole in their pocket, Google executives could now set their sight on an alternative target. The Intelligent Speculator opines that Twitter makes much more sense as a strategic takeover for Google, and I whole-heartedly agree. Twitter is the second largest social networking site in the world behind Facebook, but currently trades as a $4 billion valuation, 50% less than the value of the proposed Groupon takeover. That’s not to say Twitter would now suddenly be receptive to such a takeover, and an offer would likely have to factor in a significant premium on the current valuation. But still. From IS:
Don’t you think that it could start sending deals by creating Twitter feeds in the same way that Groupon has its websites? The better deals would get retweeted over and over. Oh and that sales team? Google has sales teams for its own business and acquired talent in other acquisitions such as Admob and Doubleclick. Oh and that database of contacts? It’s actually much larger for Twitter than on Groupon and a lot more things can be done with Twitter in my opinion. It’s not about transforming Twitter to become a new Groupon but simply adding the possibility for all users to get competing deals to the ones that Groupon and other copycats currently offer.
Google, I know you are smarter than me, but the answer seems clear. Think bigger than Groupon. Twitter’s massive following could be leveraged into its daily deals service, and its value to Google could be so much greater in terms of traffic, social implications and commercial appeal for advertisers. The sell-off in Google stock last week may not have been because investors thought the proposed deal was too rich, but because we thought there were better ways to use that cash. Twitter would be an outstanding start.
Source:
Google (GOOG) should be happy it got rejected (Groupon) and turn to a better rebound (Twitter)
Intelligent Speculator
Intelligent Speculator, December 6, 2010 5:00 AM
http://www.intelligentspeculator.net/investing_commentary/google-goog-should-be-happy-it-got-rejected-groupon-and-turn-to-a-better-rebound-twitter/
*DISCLOSURE: Long GOOG
This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by T3 LIVE or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.
