Summary:

Groupon is buying Pelago, maker of local discovery app Whrrl, signaling the end of the check-in service. But it could also mean a broader direction for Groupon as it looks to expand beyond daily deals to more localized and personalized discounts.

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Groupon has been about helping people discover deals. Now, it’s buying Pelago, maker of local discovery app Whrrl, in a bid to improve its ability to bring together consumers and local discount offers. The acquisition means the end of Whrrl on April 30 but it could also mean a broader direction for Groupon as it looks to expand beyond daily deals to more mobile and personalized discounts.

Groupon CEO Andrew Mason announced the deal today, saying that Whrrl’s strength in real-world serendipitous discovery is core to Groupon’s mission. With that in mind, Pelago CEO Jeff Holden will lead Groupon product development, with many of his team joining Grouponnovations. It sounds like more of an acq-hire with the real value in Holden and his team, and less so much in the Whrrl app, which has had a tough time competing against Foursquare and other location-based check-in apps. Holden said in a blog post that Whrrl will be closed and users will be able to obtain their information and check-in data from the Whrrl website.

Om wrote about Whrrl last year and how Holden was trying to build a location-based service that revolved around a user’s interests, which were organized into Whrrl Societies. It was a different take from other location-based services, which are often driven by the check-in mechanism. The idea was that the user experience would change in real time as members fed in more data, something Holden learned about at Amazon where he helped optimize the company’s sales process and customer pitches based on a user’s clickstream. Holden was at Amazon for almost ten years before starting Pelago in 2006.

Now, it’s too early to say exactly how the Pelago acquisition will shape Groupon but it does hold some intriguing possibilities. As Holden points out, there are natural complements when combining Whrrl’s idea economy of where to go with Groupon’s deal economy.

“The mission alignment of the two companies and the fact that we’ve taken very different approaches is a big part of what makes this marriage non-strange, and in fact, very complementary and compelling,” writes Holden in a blog post. “You would be right to expect that the ideas underpinning Whrrl and many of the inventions contained within may reemerge under the Groupon banner.”

By combining Whrrl’s technology, it could help Groupon extend beyond very general local deals that cover cities to much more hyper local offers that match a person’s particular interests. Using Whrrl’s real-time technology, Groupon can help find relevant deals for users as they move about a city. It might happen through a check-in process or it could be through something else like geo-fencing or plain GPS. But by adding Whrrl to the mix, it gives Groupon more opportunities to capitalize on the local market and also defend against competitors like LivingSocial and rivals such a Facebook, which is bringing a lot of focus on local commerce.

This highlights the looming competition in the race to secure marketing dollars from local merchants. Group discounts are one way to get the money and increasingly check-in based discounts have offered merchants yet another. But that line is blurring. Facebook is offering group discounts when people check-in as is Foursquare. Facebook is also gearing up with its new Deals offering, which will be a very social take on commerce. By buying Whrrl, Groupon is better positioned for offering deals but it might also learn a thing or two from what Whrrl’s has picked up from running a small social network.

Groupon is not really a technology company per se and most of its acquisitions are of other deal sites. But with the purchase of Pelago and of Mob.ly last year, it’s also understanding that it needs to get some more smarts in order to stay on top, especially with regards to mobile technology. Pelago, which raised nearly $22.5 million from Kleiner Perkins Caufield & Byers, Bezos Expeditions, T-Ventures and others, had some interesting ideas on local and mobile. Not we’ll have to look to Groupon to see how those pan out.

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