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Google Could Buy Groupon Deals Site

Google, the internet giant is in talks to buy Groupon for $6 billion, according to sources from the Wall Street Journal and The New York Times.

The move would solidify Google's move into the local advertising space, adding a welcome addition to its multibillion-dollar online advertising business. The purchase would also extend Google's dominance against surging competition from Facebook, which has rolled out its own deals initiative last month.

If the deal is completed, it would be Google's biggest acquisition ever, easily surpassing the $3.1 billion it spent for online display advertising firm DoubleClick in 2007 and the $1.6 billion for YouTube in 2006.

"I give it a 70-30 chance of going through," says Martin Tobias, CEO and founder of Groupon rival Tippr. "It's something that Google needs to do."

Groupon has seen a meteoric rise since it began only two years ago. In just two years, Groupon has staked claims in more than 300 markets worldwide and has more than 33 million subscribers, making it one of the fastest-growing companies in history. The local advertising market is extremely lucrative, and according to BIA/Kelsey, a consulting firm, total spending will reach $133 billion in the US this year. According to analysts Groupon's customers will spend $500 million through the website this year.

The possible buy-out is not without risk for Google, as Groupon has stiff competitors, yet Lou Kerner, a social media analyst at Wedbush Securities, said he's betting that Groupon has staying power.

"What we've seen is new businesses on the Internet can emerge and be immensely valuable. Quite often, the first company in these kinds of new and emerging fields on the Internet gain market share and continue to be the leaders," he said. "There's every reason to believe that Groupon will continue to grow and continue to command significant market share."

"Google's got the cash to spend, and Groupon is one of the few properties worth hunting. If Google buys Groupon, we will have to wait and see if it's worth the premium Google has to pay," BGC Partners analyst Colin Gillis said.

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