What a Google Buy of Groupon Could Mean for You

If Google buys Groupon, expect to see big fireworks on the local information front, along with some great deals for all.

Google’s Groupon acquisition has been rumored since last week, when All Things D broke the story. Vador.tv even reports that the deal is done, with Google paying $2.5 billion for the rising star of cut-rate coupons, according to an unnamed source.

Google has recently made some big moves into local search and directory listings, and local deals from Groupon could be the missing piece. After reportedly failing to acquire Yelp in December 2009, Google began focusing more on its own Places service. In October, Google brought more local results into standard searches, and earlier this month launched Hotpot, a nice-looking Website for rating businesses and getting local recommendations.

Google’s biggest challenge is attracting users to these services, instead of established directories like CitySearch and Yelp. I could imagine Google tying Groupon-style deals to its directory. People who are considering the discounts would see Google’s user reviews and business information, and then they’d be encouraged to write their own reviews later.

Would Groupon, in its current form, survive a Google acquisition? After all, acquisitions have been known to ruin perfectly good services in the past. For instance, the streaming music service Lala shut down after Apple snagged the company in late 2009, and to date there’s no equivalent service from Apple or another startup.

Even if Google buys Groupon for the talent — a possibility in any acquisition — the group discount idea isn’t going away. After Groupon exploded, several other Websites have popped up with very similar concepts. BuyWithMe, for instance, provides huge discounts when a threshold of people sign up — just like Groupon — and LivingSocial offers daily deals that are free if a few of your friends also make the purchase.

If Groupon goes away as we know it, those other sites will only become stronger, while Google must continue to offer good deals to draw people to its own local business listing. Cut-rate coupons have a bright future.