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Rumor: Google readying Groupon competitor

by Phil Hornshaw

A confidential fact sheet has been leaked from Google (GOOG) showing the early stages of a new service called Google Offers, a group-buying service prepping to try to cut into the massive marketshare of Groupon and similar services.

Sources at Google leaked the document to Mashable, which has since received a comment from the company that states it is contacting businesses -- basically, it comes really close to confirming that Google Offers is an imminent thing. Mashable got the following quote:

“Google is communicating with small businesses to enlist their support and participation in a test of a pre-paid offers/vouchers program. This initiative is part of an ongoing effort at Google to make new products, such as the recent Offer Ads beta, that connect businesses with customers in new ways. We do not have more details to share at this time, but will keep you posted.”

That’s a pretty big deal, seeing as Groupon is readying to launch a $15 billion IPO for its company. Google attempted to move into the market by buying Groupon -- when I wrote about it, the rumored sale was for a (somewhat laughable in hindsight) $2.5 billion. The price got up to $6 billion before Groupon rejected it. Wonder why.

Clearly, group buying is big business right now. It works by creating communities of people within services like Groupon or LivingSocial, which reach out to businesses and get them to agree to big, one-time-only deals through the service. Those deals are available to members of the service if enough people agree to buy it -- once a critical mass of users is committed, everyone gets the deal, grabs a coupon (or groupon, as the case may be) and heads out to the business to patronize it. Groupon has a huge community of users -- 20 million worldwide in 29 countries. In the U.S., the service provides deals in 150 or more markets.

A convenient mobile experience

A big part of Groupon’s success, as well as its rivals like LivingSocial, has been its ability to reach out to customers using multiple approaches. Groupon’s Android and iPhone apps are highly convenient: not only can you see deals and vote on whether you want to participate, you can even get your Groupon, the physical coupon you need to collect your reward, to appear on your phone’s screen. In a brilliant move and knowing its market is made up 100-percent of savvy, connected customers, Groupon has eliminated the need for a printer and the one major irritation -- finding the means to print out the coupon -- that its service has built into it. LivingSocial offers the same services with its Android and iPhone apps too.

You can bet that Google is paying strict attention to the Groupon model and exactly how it works, and given its prevalence with apps for its other services -- Google Places, Google Mobile, Google Voice -- a Google Offers app is probably already close to finished and ready to go for both Android and iPhone. Offers will likely carry all the functions of Groupon, and it’ll very likely integrate Google Maps and Google Places, the company’s check-in feature. I’d expect the app to do just enough cool things to make it better than the competition.

What remains to be seen, however, is whether Offers can really stand on equal footing with established group-buying sites. Groupon and LivingSocial already have lots of loyal users, and while everyone knows Google, that doesn’t mean everyone uses their services. Remember Google Wave? When was the last time you checked up on Google Buzz? It’ll be a matter of how much weight the Google name carries with small business owners, which are the bread and butter of the group buying experience. Will they go with Google, or will they bank with Groupon’s runaway $15 billion success story?

On the other end, the strength of Google’s Offers community will likely depend on the strength of its tools. Its web interface is going to play a big part, as are its apps. Certainly the company is going to spend a lot of time on both those things to ensure that users have the easiest time executing their deals as possible.

Groupon, LivingSocial and their brethren might want to start looking at how they can improve their apps -- Google is, and you can bet it’ll have learned some lessons from its competitors when Offers eventually goes live.