According to the Wall Street Journal, New York Times and other published reports, Google (Nasdaq:GOOG) attempted to buy bargain coupon internet marketer Groupon for $6 billion but was rebuffed. The 2-year-old coupon site, with 35 million subscribers worldwide, apparently has decided to remain independent.

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Why Buy Groupon?
Groupon, which offers consumers one-time group deals with local merchants, combines internet marketing and social networking. Google may view Groupon as an opportunity to turn Groupon into an even more potent marketing vehicle. The search giant is sitting on $33 billion of cash as of Sept. 30, and some observers feel Google is running out of opportunities to grow its own business without acquisitions.

A New, Already Crowded Space
Groupon has already spawned countless imitators. By some estimates, the count is approaching 200. One such site, Living Social, just had Amazon (Nasdaq:AMZN) invest $175 million in it. Six other companies have raised a total of $50 million in venture capital. Activity on the business side of this space has already been described as "frenzied".

Does The Deal Make Sense?
Investors may or may not have paid attention to Groupon, but they certainly know Google. Whether they know what Google is buying at all times, such as a New York City building for $1.8 billion, is another thing. Investors are probably more familiar with Google's 2008 $3.2 billion purchase of online advertiser Double Click, Google's most expensive acquisition to date.

With the possibility of the Groupon deal out there, some critics might have a flashback to legendary investor Peter Lynch's sardonic comments about companies that sit on huge piles of cash, sometimes not knowing what to do with it. The potential buyout could be a quick score for Groupon in an uncertain and volatile new internet landscape, but it's unclear how Google can ramp up the scale of Groupon to make it worth $5 billion or $6 billion. (Learn the basic tenets that helped this famous investor earn his fortune. Check out Pick Stocks Like Peter Lynch.)

The Already Old Internet
While Groupon and the other online coupon marketers offer daily local deals, it looks as though Google wants to make daily deals of its own, as in acquisitions. Yet when you compare thriving Google to less dynamic companies like Yahoo (Nasdaq:YHOO), you can see why grow - or in this case, expand - by acquiring or be left behind might be an appropriate theme for internet businesses.

Maybe it's no accident that Google and Amazon are more actively entering ancillary businesses all the time, while the Yahoos, eBays (Nasdaq:EBAY) and other alums of the already older internet group appear slow and unimaginative by comparison. Why is Google interested in Groupon? Because Google - like Amazon and even Netflix (Nasdaq:NFLX), another nifty, nimble company - wants to stay ahead. Put another way, Google doesn't want to end up like its competitors.

What's The Verdict?
On the face of it, any potential deal looks like Google would be overpaying for something like Groupon when that business looks as though it could be duplicated by Google. Perhaps the Lynch factor is in play, or Google is just getting lazy. Yet starting up its own Groupon could be costly and time consuming for Google to get the necessary thrust for its own bargain site to take off. Groupon is ready made. And Google's judgment has been at least adequate or better so far on the things it's done beyond search. Think Android or YouTube. So, despite the head-scratching this deal might induce, give Google the benefit of the doubt for now and watch what it does.

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