After Groupon, What's Next for Google?
December 7, 2010
Unless you’ve been living on a deserted island in the last 10 days, you’ve heard about the presumed $6 billion Google bid to buy Groupon, the leading daily offers player. Groupon walked away from the opportunity on Friday and will probably do an IPO in the next12-18 months (like Facebook). I gave a couple of media interviews last week on the phenomenon, one in the Montreal Gazette (here and here) and the other one in La Presse (in French), but I didn’t have the chance to blog about the story yet. Let’s fix that.
Why did Google want to buy Groupon and at such a huge valuation? For a couple of reasons.
1) Google wants to make sure they’re not seen as one-trick poney by Wall Street. Because they’re a public company, they need to show huge growth to meet expectations and expand into many ad vehicles. At their last quarterly call, they highlighted the success of their display ads business. Groupon is rumoured to have annual revenues of $2 billion and it certainly would have added interesting top-line revenues and great growth rates. Not sure Google would have liked the lower margins than what they have in search advertising, but it is what it is.
2) Google wanted to buy a local sales force. Groupon is present in more than 300 metropolitan markets and 35 countries and they’ve used their capital to scale the sales team and acquire regional players in Europe and Asia. Google has signaled many times in the past couple of years that they haven’t been satisfied with their large volume local sales channel partners (read Yellow Pages) and they’re probably wondering about having their own local sales force. Over the years, many rumors have surfaced about Google buying Yell and other large directory publishers. With the Groupon acquisition off, directory publishers stock has risen in value. According to The Street, “Three small-cap companies soared on Friday. Dex One Corporation ended nearly 49 percent higher, boosting its market cap to $335 million. It owns Yellow Pages and White pages directories. Meanwhile Supermedia, which pushes Superyellowpages.com and other local ads, soared 20 percent on a huge spike in volume. Its market cap is still just around $105 million. And Local.com, a business search engine and ad network, added 8.3 percent with a $90 million market cap.”
Both Supermedia and Dex One still have huge debts pushing the total cost of an acquisition higher (probably $3 billion +). Interestingly enough, Greg Sterling reported yesterday that Yell was thinking of selling Yellowbook, their US arm. Good timing!
Could a transaction to buy a directory publisher happen? Yes, it’s possible but I wouldn’t say it’s probable. There’s probably an underlying culture clash issue, trying to match Google with a Yellow Pages company. Google will probably be tempted to look at other options before including building their own sales force. After all, if Groupon did it, Google has all the capital it needs to create their own. It might take 12-24 months, but it would probably cost less than $3 to $6B required to make an acquisition. Could they look at ReachLocal? They had 641 salespeople as of Q2 2010 and a much smaller market cap / debt (under $1B). Maybe. One thing is sure. Google will make a strategic move in that field in the coming months.
David Swanson, Dex One's CEO, to Retire
May 21, 2010
Just received this release from Dex One announcing the retirement of David Swanson, their CEO.
Dex One Corporation (NYSE: DEXO), a leading provider of marketing solutions for local businesses, today announced that David C. Swanson, the company’s chairman and CEO, will retire effective May 28, 2010. The company’s Board of Directors will be initiating a search for a new chief executive officer to succeed Swanson.
via Dex One Corporation.
What it means: This is definitely an important moment for Dex One in terms of defining their future. I met Dave Swanson last year and had been impressed with his thoughts and vision. The last few years have been a real roller-coaster for the organization with RHD buying Dex Media in 2005 (has it been 5 years already?), their acquisition of Business.com in 2007, a superb ride on the stock market and the fall to chapter 11 protection last year. Their exit from bankruptcy protection in February 2010 can be seen as the beginning of a new chapter (no pun intended) and Swanson’s swan song (pun intended). I suspect the company is now ready to embrace the future and the necessary changes required for success. The type of candidates they approach and the person they eventually select will largely influence the future of the company, probably the same way that Jean-Pierre Rémy seems to be imprinting a new vision/direction for PagesJaunes in France. All industry eyes will be watching that next move.
In Orlando Next Week For The Kelsey Group DMS '09 Conference
September 16, 2009
I will be in Orlando next week for the Kelsey Group DMS ’09 conference. I haven’t missed many of those great events over the years and I’m looking forward seeing my industry colleagues in person.
Here are the presentations/panels I don’t want to miss:
Tuesday Sept. 22, 2009
- “Moving Multiproduct Selling Beyond Bundles”. The interesting challenge directory publishers face today is to transform their sales organization into one that’s able to sell online advertising-only, not just print/online bundles. There’s also the new real-time Web which will create opportunities to launch time-sensitive offers and coupons, requiring multiple touch points during the year. That’s something directory publishers need to improve. See this conversation between Michael Taylor and myself on Linkedin (you need to be a member of the Kelsey Group Linkedin group to see it)
- Kelsey’s User View and Local Commerce Monitor. Always interesting data points on users and advertisers.
Wednesday Sept 23, 2009:
- The keynote from David Swanson, Chairman and CEO, R.H. Donnelley. As RHD prepares to exit bankruptcy protection, it’s going to be interesting to see how RHD is expecting to reinvent itself.
- “The Global Yellow Pages Leadership Forum: Answers to the Tough Questions”. This should be the highlight of the three-day conference. Six global industry leaders will discuss the opportunities and challenges of the local industry. I wonder who will replace John Kannapell from AOL who was just let go.
- “Mobile Search & Yellow Pages: The Business Model”. Four senior mobile managers from directory publishers talk about the importance of mobile, their strategy, and the business model. Curious to ask them about their “big ideas” around mobile.
- The second keynote of the day, David Krantz, President & CEO, AT&T Interactive.
Thursday Sept 24, 2009
- The keynote from Donat Rétif, CEO, Truvo. I saw him speak at the EADP conference back in May but given that Truvo wants to be innovative in the directory space, it’s going to be interesting to get an update from them.
- “Print Yellow Pages 2013: Critical Changes to the Core Product”. Very curious to see if we will finally hear about real print innovation.
The conference is held at the [praized subtype="small" pid="79b0fad769b11f4b8998b682a0374edd7f" type="badge" dynamic="true"]. If you’d like connect in Orlando, send me an e-mail sprovencher AT praizedmedia.com
