Google 'set to make bid for Groupon'

Google is reportedly closing in on a deal to buy online discount-coupon sensation Groupon for up to $6bn in its largest-ever acquisition, signalling a willingness to use some of its huge cash hoard to buy growth.

A deal, reported by several media including the New York Times, would give Google an important window into a fast-growing $91bn local advertising market.

But Google's shares fell 4.5 per cent, partly on concern it may shell out too much for a business likely to face increasing competition. Reports of the deal came as the European Union announced plans to investigate Google's search practices.

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"Investors think that might be overpaying," Kaufman Brothers analyst Mayuresh Masurekar said of the reported $5bn-plus deal.

"There are no barriers to entry," he said of Groupon. "There is nothing unique to what they're doing, so there is a risk that Google overpays for Groupon at this point."

But he added that buying Groupon could help Google make further inroads into a local advertising market that analytics firm Borrell Associates estimates will be worth $91.1bn in 2010.

Groupon sends its members daily e-mails with about 200 discounts for goods and services. The deals are activated only when a minimum number of people agree to make a purchase, giving Groupon clout to negotiate steep group discounts on products and services.

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Wedbush Securities analyst Lou Kerner said the daily deals service dovetails with Google's search advertising business, with both focussed on helping merchants acquire customers.

"Google is building a mosaic of marketing solutions for businesses," said Kerner.

"So having this kind of flash sale side of the business, which will all be automated, just makes a ton of sense."

A Google spokesman said the company does not comment on rumour or speculation.

Groupon has been called the fastest-growing internet start-up in history. It does not disclose financial figures.