Google Offers May Deal Groupon a Bad Hand

Groupon, LivingSocial and other daily deal sites may be dealt out of the game if their newest competitor keeps upping the ante.

Reports from Portland, Ore., say that Google Offers, the newly-launched daily deals service from search giant Google, is offering very attractive terms to businesses, most notably including quicker payments to merchants.

Portland has been the test market for Google Offers, which is set to go live soon in both New York and San Francisco.

Besides paying merchants more quickly – no small consideration for cash-starved small businesses – Google Offers reportedly is also building consumer demand through channels including search ads, display ads local company listings and the company's forthcoming “Wallet” mobile payments service.

Google should also be able to capitalize on its 1 billioin unique visitors and tens of millions of Gmail accounts to target Google Offers deals to consumers who are likely prospects.

On the other hand, Groupon and LivingSocial both have large, well-established local sales staffs, something Google lacks.

Groupon's warts

Some of the shine is off Groupon lately, as merchants begin to tally up the true cost of giving huge discounts on goods and services while also paying a fat commission to Groupon and then having to wait for Groupon to pay – all without any assurance that the daily promotions will result in repeat sales.

The daily deals sites are also said to be affecting morale in restaurants and other service establishments, where the wait staffs complain that the huge discounts cut into their tips.

Some marketing experts are going so far as to suggest that the coupon mania can't last much longer. The improvements Google Offers is making may make it more palatable to merchants, especially if more precise targeting results in building repeat visits by coupon holders.