Dec. 6 (Bloomberg) -- Andrew Mason, founder of daily deal site Groupon Inc., is a serial prankster, dedicating office space to a fictitious character, hiring a performance artist to walk around the headquarters in a tutu and dreaming up a holiday called Grouponicus whose celebrants are barred from owning dogs.
There was no joking, though, when he spurned a takeover offer worth $6 billion from Google Inc.
Mason, Groupon’s chief executive officer, fretted that the sale would sap employee morale and alienate business clients, said two people with knowledge of the matter. The people asked not to be identified because the talks, which spanned Chicago and the San Francisco Bay area and involved Google CEO Eric Schmidt, were private.
Independence gives Mason, 30, more time to keep building one of the world’s fastest-growing companies, which topped $500 million in annual sales more quickly than Web pioneers including Google and Amazon.com Inc. did. Yet Groupon, whose strategy has spawned dozens of copycats, also is left without the financial backing and global distribution it would have gotten from ownership by the world’s largest Web-search provider.
“You can set up your own daily deal website in an hour,” said Ira Weiss, a professor at the University of Chicago Booth School of Business. “They happen to have a lead on it, but if I were them I would have sold for that price.”
It wasn’t high enough for Mason, a college music major who quit his job at a Chicago recording studio and later dropped out of a master’s program in public policy to start websites.
Mason, who previously fielded an advance from Yahoo! Inc., follows Facebook Inc. CEO Mark Zuckerberg in betting his company will fare better with venture backing than as part of a bigger owner.
“Before anybody says, ‘You have to be crazy to turn down this $6 billion offer,’ you have to consider who the people making the decision are,” said Matt Moog, a Chicago-based entrepreneur who took coupon startup CoolSavings public in 2000 and later sold it to private investors. “Andrew is a very smart guy. He clearly has a vision for where this is going; he’s not in it for this scale-and-flip kind of thing.”
Mason and Aaron Zamost, a spokesman for Google, didn’t respond to requests for comment. Julie Mossler, a Groupon spokeswoman, declined to comment.
At $6 billion, Groupon would have been the most expensive purchase for Mountain View, California-based Google. The company’s shares rose $5.36 to $578.36 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has dropped 6.7 percent this year.
Local Commerce ‘Vision’
Going it alone worked out for Palo Alto, California-based Facebook, which is worth more than $40 billion, according to private share trading site SharesPost Inc., less than five years after spurning a $1 billion bid from Yahoo.
Founded in 2008, Groupon has amassed 35 million registered users and a staff of 3,000 people, most of them in sales. The Chicago-based company delivers deal-of-the-day coupons in more than 300 markets.
“He has a unique and profound vision about local commerce,” said Yuri Milner, founder of Digital Sky Technologies, a Groupon investor. “He was instrumental in identifying a pretty unique model of allowing small businesses to access customers.”
Groupon has grown largely because of the unconventional efforts of Mason, who says that if the staff enjoys its work of soliciting deals and marketing them to consumers, then users will relish buying them, according to Moog.
“He’s a very funny, wry guy who doesn’t take himself too seriously and he’s been able to infuse that into the brand,” said Moog, who now runs online customer reviews forum Viewpoints Network. The witty descriptions of spa packages and beer tastings that accompany offers help get users to pay, Moog said.
Mason followed a different path from the many Web-startup CEOs who hone computer programming skills at schools like Harvard, Stanford and the Massachusetts Institute of Technology before scouring Silicon Valley for investors and staff.
Mason worked early on at Electrical Audio, a musty, two-story recording studio in the Roscoe Village neighborhood northwest of downtown Chicago. After earning a music degree from Northwestern University, the pianist and Billy Joel fanatic began helping at the studio on weekends, setting up equipment and fetching coffee for performers, says Greg Norman, an engineer at the studio and a friend of Mason’s.
Groupon, which takes half of sales from discount offers merchants make on its site, discussed a sale to Google as early as November, people familiar with the matter have said. The discussions included Schmidt and Google founders Sergey Brin and Larry Page, as well as David Lawee, who handles mergers and acquisitions, one of the people said.
Groupon will make a decision next year on whether and how soon to proceed with an initial public offering, one person said. Investor appetite for technology public offerings is heating up, said Lise Buyer, founder of IPO consulting firm Class V Group in Portola Valley, California.
“It’s a very healthy IPO market right now for companies that have proven business models, and Groupon clearly fits in that category,” Buyer said. Of the 55 technology sector companies that have gone public this year, 40 are trading at above their IPO price, according to research released last week by Pacific Crest Equity Capital Markets Group.
Martin Tobias, CEO of rival Tippr.com, based in Seattle, said Groupon should have sold to Google.
“They are going to hope the honeymoon continues,” he said. “I’ve seen these things cool off quite quickly.”
LivingSocial, the No. 2 player in daily deals, announced a $175 million investment from Amazon last week. Other copycats include New York-based BuyWithMe.com.
As he moved away from music toward startups, Mason split time between building Policy Tree, a site for organizing political discussion, and pursuing a master’s degree at the University of Chicago’s Harris School of Public Policy.
One of about 125 students accepted from an applicant pool of about 800, he stood out to teachers and administrators for having a clear plan to put his education to use.
“A lot of what students are facing in their first quarter is pretty theoretical material,” said Ellen Cohen, dean of students at Harris. “It’s rare for somebody to convert it all into something that is technology-based and actionable.”
Mason took a leave of absence when he got $1 million in funding from Eric Lefkofsky, an investor in startups, for a new company called The Point, a precursor to Groupon that helps wannabe activists raise funds and build petition lists by recruiting friends on the Web. The Point inspired Mason to try a new site based around the idea of collective buying.
Based in a six-floor warehouse in Chicago’s River North neighborhood, Groupon has rapidly added workers, many of them Midwesterners in their 20s. Staff writers, some of them recruited from the local improvisational comedy scene, churn out witty descriptions of deals at a rapid clip, often pulling previously used jokes from an online wiki.
Mason likely signed an agreement that bars him from discussing aspects of the Google approach. Still, even before talks ended, someone posing as “Mason Andrews” on a site called Nopuorg -- Groupon spelled backward -- poked fun at the notion of a takeover.
Mason sent a link to the site from his Twitter feed.
“Andrews” blogged about suitors his company spurned. AskJeeves was turned down because “the search giant demanded too many concessions”; Mason Andrews rebuffed Sony Corp. because he “could never sell Nopuorg to a foreign company.”
Andrews concludes, saying, “Nopuorg has not…is not…and WILL NEVER sell out.”
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