Groupon Said to Seek New Funds After Rebuffing Google

Groupon Founder Andrew Mason
Andrew Mason, founder and chief executive officer of Groupon Inc. Photographer: Noah Berger/Bloomberg

Groupon Inc., owner of a daily coupon website with 40 million subscribers, is seeking funds after rejecting a takeover offer from Google Inc., three people familiar with the matter said.

The company aims to raise several hundred-million dollars, one of the people said. The increased financing would value Groupon at less than $6 billion, the amount Google offered in November, said two of the people, who asked not to be identified because the talks are private.

Groupon, one of the world’s fastest growing companies, may use the money to hire sales staff and retain its lead over coupon-site rivals. LivingSocial, another deal-of-the-day service, lined up $183 million from a group led by Inc. earlier this month and said it would use the investment to overtake its bigger competitor.

An investment group led by Digital Sky Technologies in April gave Chicago-based Groupon a valuation of about $1.3 billion.

Groupon had been considering raising money from investors when it entered talks with Google, Bloomberg reported last month. Founded in 2008, Groupon is on pace to generate more than $500 million in sales this year, according to the people.

Daily Deal Explosion

The company is trying to get a bigger toehold of the U.S. local-advertising market, which may rise to $133 billion this year, according to consulting firm BIA/Kelsey in Chantilly, Virginia.

Groupon also spurned an earlier offer from Yahoo! Inc., owner of the largest Web portal in the U.S., people familiar with those talks have said.

Daily-deal sites offer discounts -- often 50 percent or more -- from businesses such as restaurants and nail salons, then keep a portion of the sales. The promotions activate once enough people sign up for them. The barriers to start such a site are few; just about anyone with an e-mail list and a deal can do it.

OpenTable Inc., an online restaurant-reservation system offers a daily deal. Other sites including Gilt Groupe Inc. and Facebook Inc. also provide coupons.

LivingSocial is Groupon’s closest rival. The Washington-based company said it will more than triple its employees next year to 1,800 and more than double the number of cities where it offers deals.

That would bring the service to 300 markets, about the number that Groupon now serves with its staff of 3,000.

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