A Google deal to buy Groupon won't work...

Summary:Google is great at engineering but bad at direct sales. Would the purchase of Groupon and its local sales force change Google?

Google is very good at engineering it is lousy at sales, that's why it prefers to automate the sales process via an auction process for its Google AdWords and AdSense sales. But there have been persistent rumors this month about Google buying Groupon, the local coupon-based group buying startup.

Faith Merino at VatorNews reports that Google has purchased Groupon for $2.5 billion:

... according to an unnamed insider who spoke with VatorNews. Neither Google nor Groupon could be reached for comment to confirm the report, but Vator's source is reliable and the report falls in line with the recent string of Groupon acquisition rumors.

I'm suspicious about this deal because it doesn't make sense for Google. Groupon relies on a large number of people to make the sales for Groupon to work.

Google is a business that relies on machines and algorithms -- not on managing large numbers of sales people.

Caroline McCarthy at CNet News makes a similar point:

Groupon's "secret sauce" is not its technology ... but its massive sales force and how that sales force is organized. It's not Google's usual cup of tea, but it's one of Google's own weak spots.

But she writes that Google needs to move beyond engineers and beef up its direct sales force. She quotes David Ambrose, co-founder of Scoop St, a Groupon clone, that Google might pay more than $2.5 billion becaus "Google has never really been able to do direct sales well at all."

I don't believe that Google can buy a direct sales force capability. If it does, that effort will fail. Google's culture is engineering based and the sales force will never have the clout of engineering.

Just because it makes sense to have a strong direct sales force doesn't mean that it makes sense for a company to acquire one. Company culture always trumps logic and reason. And company culture is the least agile part of any organization.

And Google's engineering culture is deeply wired. For example, Google has been encouraged by vocal observers to buy a newspaper, such as the New York Times. But again, something like that would never happen because Google doesn't want to manage editors, journalists, foreign news bureaus, etc. It knows how to manage servers and software.

At the bottom of every Google news page you see the following:

"The selection and placement of stories on this page were determined automatically by a computer program."

Placement was not determined by a person but by an algorithm.

Algorithms and machines are a far more scalable and profitable business than a people based business such as a newspaper, or Groupon. That's why I don't believe the rumors about Google buying Groupon, or if the deal has taken place, I don't believe it will be successful and I question whether Google's M&A people know what they are doing.




Topics: Enterprise Software, Google

About

In May 2004, Tom Foremski became the first journalist to leave a major newspaper, the Financial Times, to make a living as a full-time journalist blogger. He writes the popular news blog Silicon Valley Watcher--reporting on the business of Silicon Valley.Tom arrived in San Francisco in 1984, and has covered US technology markets for leadi... Full Bio

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