Who is the next Groupon (for Google to buy)?
http://www.ricmerrifield.com/2010/12/whos-the-next-groupon-who-will-google-go-after-next/
Although there was an article in the paper suggesting that Google's offer of $6 billion for Groupon wasn't totally nuts given that they are already at a run rate of over $1 billion, so $6B is really only a bit over 4x revenue. True, but I predict that it will go down as one of the most spectacularly poor decisions on the part of Groupon for passing on that deal. There are no barriers to entry into the space and there are a lot of known flaws in the model, and a lot of fast followers like Tippr that could easily do to Groupon what Facebook did to Myspace (Myspace stumbled and Facebook replaced them and that was that).

So who is next?

Well there are lots of interesting companies for Google to buy, but as they look to grow their enterprise business which is already a very respectable 10% of revenues, expanding their offerings to further differentiate and offering more to customers seems like a smart play. So who has a cloud based solution that already has strong revenue in space that Google has no presence, but that company has stumbled a bit of late?

Before I throw out the name, here's a quote from a December 11, 2010 Standard & Poor's report:

"Worldwide revenues associated with applications deliverable under a software-as-a-service model are expected to increase to $20.6 billion by 2014 from an estimated $8.1 billion in 2009, according to a June 2010 report by IDC, a market research firm. This represents a compound annual growth rate of 20.4% from 2009 to 2014. Customer relationship management is one segment that in our view, is well-suited for on-demand delivery. Other areas include procurement, travel and expense management, certain areas of human capital management, and enterprise resource planning."

One company that comes to mind is salesforce.com (ticker CRM). Great business to get into, but the issue with trying to buy salesforce is that their stock is about $140 a share right now, which is over 250 higher than earnings per share which is in the stratosphere with a market cap of over $18 billion. Wrong timing for bringing in a small amount of profit for that much money.

So who else? The S&P report above also mentioned expense management. Ever heard of Concur Technologies (ticker CNQR)? They are a great story. They were an almost dead dot com company that sold license software to enterprise, they have very successfully migrated to being a software-as-a-service company. If I am not mistaken the stock got well under a dollar per share at the low and now it has been back over $50 per share. But at the moment they are also trading with a pretty high price/earnings per share ratio of about 138, but last month a report on Concur from Merrill Lynch was called "Outlook good, but not enough" and just last week Standard & Poor's lowered their recommendation on Concur from Hold to Sell. The message in the reports is consistently that the news is good, but not good enough to support a P/E ratio of 138, which means that the current market cap of Concur ($2.8 billion) is probably around what it would cost Google (or someone else) to buy them.

Google has the money, it expands their offerings overnight. Expense management is much less complicated than something like customer relationship management to sell or deliver. Why wouldn't they buy them to expand their enterprise business and offer more to customers?

-Ric