Google’s Daily Deals Service Emerges to Take on Groupon

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Four months after Groupon turned down Google’s $6 billion buyout offer, the search giant appears to have built what it couldn’t buy. The company has begun rolling out Google Offers, a new discount offer service that seems to be created in the mold of that daily deal provider that got away.

The initial launch of the beta service is in Portland, Ore., while residents of New York City, San Francisco and Oakland, Calif. are also able to sign-up in advance upcoming launches of Offers in their cities. Users need to register through Google, then will receive regular e-mails alerting them to deals and coupons in their area worth 50 percent or more off.

“Today we launched a marketing campaign inviting Portlanders to sign up for a test of Google Offers — to get great deals delivered right to their inboxes. Offers is part of an ongoing effort at Google to make new services that give consumers great deals while helping connect businesses with customers in new ways,” Google said in a statement.

This follows on reports back in January that Google was preparing a Groupon competitor. It’s unclear how Google will differ from Groupon and how it will compete with its rival Facebook in this space. Delivering a daily deal by itself is getting less interesting. Even Groupon is working toward more location-based, timely deals with Groupon Now, a new mobile app. Facebook is looking to exploit its social graph to make commerce more successful. There are ways to compete with Groupon: by taking a smaller cut from merchants or doing a better job establishing long-term relationships between merchants and customers.

Google is building its own relationships with local merchants through Google Places, its directory of businesses, but it’s not clear how much Google is willing to spend on building a true Groupon competitor. A lot of Groupon’s success has been in building up a big sales staff that can reach out to local business owners. Google will need to find a way to match that reach or create a really elegant and simple way for merchants to offer deals through Google. It was reportedly looking at Single Platform, a one-stop shop for merchants looking to market through online, social and mobile channels, but it will need something to compete here.

As I wrote earlier this week, Google seems to be getting the importance of the local battle. There’s a lot of money to be made from merchants, retailers and restaurant owners who are looking to drive traffic into their stores. They’ve traditionally advertised in newspapers, Yellow Pages and through mailers, but they’re now switching to online advertising and more social and mobile opportunities like Groupon, Yelp and Foursquare. Google absolutely needs to be in there, and it knows this. Fortunately for Google, it’s got a lot of assets in place to deal with the problem. It’s seeing a lot of success with more mobile, location-aware advertising and it has a great product in Google Maps, which can direct users right to local businesses. It’s also got a local recommendation engine with Hotpot, which has been rolled into Google Places.

If Google can create a credible discount service and achieve scale quickly, it can provide another way for merchants to target consumers as well as keep some of the dollars going to other mobile and social shopping services. This will, again, require Google to spend a fair amount of money. And it will have to figure out how to tap social channels to get people to share these offers. As we’ve noted, Google seems challenged when it comes to social, so it’s still not clear how successful it will be in daily group deals. But if it can carve out a good piece of the pie, it can show it didn’t need to spend $6 billion on Groupon. But if it stumbles badly, that missed deal will likely sting even more.

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