Google Could Mobilize Groupon In Saturated 'Deals' Market

Google appears set to stake a bigger foothold in the local digital marketing space by acquiring the two-year-old Groupon’s unusually fresh list of 15 million e-mail addresses, segmented by city and purchase behavior. Google plans on buying the daily deals platform for anywhere between $5.3 billion and $6 billion as early as this week, according to AllThingsD and The New York Times.

Groupon is rumored to be pulling revenues of $50 million a month. While some industry pundits have characterized Google’s reported move as a coup, important questions abound. And here’s a big one: Is the online daily deals bubble on the verge of bursting?

The niche Groupon pioneered seems on the brink of consumer marketplace saturation with an onslaught of new competition. While LivingSocial is the second biggest player, Dealster, Woot, DealPop, Kgb Deals, SocialBuy, Tippr, Bloomspot, and Townhog are other names that have popped up. In addition, many newspapers are offering daily deals of their own via house ads on their website and/or through their e-mail list.

So while the daily deals niche has been increasing dramatically – the lion’s share of Groupon users have been picked up during 2010 alone – how much more it can grow certainly remains to be seen.

At the same time, Google would seem to give Chicago-based Groupon new avenues of distribution that could help it stifle the competition and lead the niche into a likely more mobile-centric era. Google’s text and map search results would seem a good fit to push Groupon’s locale-based daily deals via both Google.com and Google Mobile.

As an example, a Groupon icon could appear on Google Mobile maps for a restaurant deal after viewers conduct a search query in that Zip code or neighborhood. The mobile users could then click-through, purchase the deal, and walk into the eating establishment. The Mountain View, CA-based Google’s local marketing prowess could be substantially bolstered by leveraging Groupon not only via those platforms but also via Android apps.

Meanwhile, Google purchasing Groupon would possibly lead to another big question: Which major company would then buy LivingSocial?