If Google buys into coupons, it will still have to build

The New York Post is reporting the unsurprising news that Google is getting over its unrequited love for Groupon by trying to buy a smaller online-coupon business like LivingSocial or BuyWithMe, the No. 2 and 3 companies int he busienss

If true (this is the Rupert Murdoch-owned New York Post, not known for its tech reporting, after all, and the story is based on a single “source close to the situation”), it would mean the Google still prefers to buy its way into the coupon market rather than build its own similar service. That much was obvious from the $6 billion it offered for Groupon, the dominant player in the fast-growing daily-deals market, which small businesses are increasingly embracing as a way to turn Internet users into real-world customers.

Still, since the Chicago-based Groupon has an estimated  80 percent of the market, Google would have to do a good bit of internal building no matter what. But starting with an established outfit like LivingSocial or BuyWithMe would make things a little easier.

Estimates for Groupon’s annual revenue range from $500 million to $2 billion, and the actual size of the total market isn’t well understood yet. The Post says BuyWithMe  is “the third- or fourth-largest” company in the market and that it has only $20 million in revenue. That company’s president, David Wolfe, wouldn’t tell the Post whether he was in talks with Google, but he did say that Google needs to get into the market to snap up the local advertising it covets.

BuyWithMe has a big presence the New York area, and yet even there, Groupon is beating it, Wolfe said. However, he promised that early in the new year, he’d have more than Groupon’s 900,000 subscribers in the region.

The No. 2 player, LivingSocial, has 10 million subscribers. Groupon has 35 million. But as The New York Times’ Dealbook notes, buying that company might be tough for Google. LivingSocial, already backed by the likes of former AOL CEO Steve Case, raised $183 million from Amazon.com and LightSpeed Venture Partners, valuing the company at $1 billion. LivingSocial so far says it wants to go it alone.