The following is a guest post by Mobile Guru

A report today from BIA/Kelsey said that it expects U.S. mobile local advertising revenues to grow from $213 million in 2009 to $2.03 billion in 2014, at a 57 percent compound annual growth rate. This represents 44 percent of total U.S. mobile ad revenues in 2009, growing to 69 percent in 2014. Companies such as Groupon and LivingSocial both capitalize on local advertising by having deals of the day that offer discounts to people who opt in to certain deals.

Recent rumors have surfaced that indicate that Google (GOOG) will soon be purchasing Groupon for up to $6 billion. Today Amazon (AMZN) invested $175M in LivingSocial. Two large companies with two unique approaches to investing in this high growth area. On one hand, Google wants to own Groupon and will offer some large benefits that will help them grow. Amazon, by becoming an investor in the company, will actually cash out if LivingSocial gets bought out or does an IPO, which has been rumored.

Here are some interesting statistics for Groupon and LivingSocial. Both companies are said to be looking at roughly $500M in revenues for this year. Both have over 10 million users with Groupon having 12 million and LivingSocial 10 million. Both companies have only been around for the last several years. Neither company owns a barrier to entry which means with the right backing almost anyone can get into this business and probably will.

So where does that leave these two in terms of the buying into the local daily deal? Google looks to soon be going all in with $6B. With little doubt that the concept of the daily deal will continue to grow, we should soon see Groupon as part of the Google search page. Amazon, on the other hand, will be enabling LivingSocial to expand into any of the key markets they currently are not serving. I suspect they are probably within 3-6 months of an IPO since Google will soon give LivingSocial a comparable valuation to Groupon.


The real question is whether Amazon will be able to get any benefit out of the investment other than the financial gain down the road. Probably not, but it all comes back to the risk/reward profile for any investment. If Groupon goes the way of so many technology investments and ends up a bust, no one is going to say much about it. Face it, YouTube looked like a huge bust for a number of years and now I wonder what people think it’s worth? Would you rather own YouTube or Twitter? On the other hand, if Amazon made a $6B investment in Groupon and it went the way of a Bebo, they would never hear the end of it. Instead, by putting in $175M they can enjoy the rewards (and benefit from the inflated valuation thanks to Google) with minimal downside loss.

I’m a long time investor with investment experience in high tech, biotechs and precious metals. I blog on topics that are of interest to me and my goal is to generate intelligent discussion. I don’t consider myself an expert in any one area, but know a little about a lot of things. I believe as soon as we stop learning, we stop living. You can connect with me at SeekingAlpha.

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