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Why It Makes Sense For Google To Buy Groupon

The big rumour of the day is that Google may be buying cluster purchasing outfit Groupon for an eye-popping $2.5 billion, not bad for a company that was launched in November 2008 and which already serves 250 markets worldwide.

But even that multi-billion pot of money sounds like a bargain when one takes into consideration the fact that Groupon generates estimated revenues of $50 million per month or $600 million annually.

In fact, Forbes has called it the fastest-growing company in web history, one that surpassed Google, Facebook and Yahoo without breaking a sweat.

Unlike Youtube, which Google is still financing, Groupon is already turning a profit by squeezing its partners very hard (taking half of the revenues of every deal).

It fits Google's plans perfectly, as John Battelle pointed out, since it connects commerce, search, social and small business altogether and is doing exceedingly well in a highly competitive market.

It could be compared to the all-important "glue" that will make Google's location based services (Google Latitude, Google Places, Google Maps, Google Street View, Google Mobile QR & NFC) coherent.

Some however have questioned the short-sightedness of websites like Groupon which have thrived during the recession and encourage people to find the cheapest deals regardless of the impact these may have on the businesses involved in the process.

A research by Rice University in September found out that more than 40 per cent of businesses surveyed in the study said that they would not be running Groupon promotion again.