Groupon grabs German clone CityDeal to create European beachhead

Social buying site Groupon has acquired its biggest would-be competitor in Europe, CityDeal. The deal gives the fast-growing group deal service a presence across the pond, bringing the company’s total reach to 18 countries and 140 cities. It also means the company has effectively tripled in size to 900 employees. Terms of the deal were not disclosed.

“Since its launch in Berlin five months ago, Citydeal’s rapid growth across Europe has proven that the Groupon model is truly global — and by coming together, we are establishing Groupon as the company that not only invented, but now universally defines this new model of commerce,” said Groupon chief executive Andrew Mason. Chicago-based Groupon also recently acquired San Francisco-based Mob.ly to gain itself a Silicon Valley presence. The deal also comes after the company raised $135 million from Russia’s Digital Sky Technologies and Battery Ventures.

“Social” or “collective” buying is when a site such as Groupon is able to draw large numbers of consumers together to buy the same product so that they can get special pricing on that product. Several variations of the model exist, but overall, social shopping seems to be thriving. (If you’re interested in Mason, and how the company skyrocketed to more than a $1 billion valuation in a year and a half, here’s our interview with him here and here’s a story covering the social buying trend.)

Mason said he decided to go with an acquisition instead of organic growth because the company wouldn’t be familiar enough with local markets and cultures to compete. So Groupon’s management team started feeling out a number of European-based lookalikes to find the best match.

Mason said Oliver Samwer, one of Citydeal’s co-founders, stood out — particularly because the company had reached #1 in every one of the countries it serves in five months. Samwer also had experience building European versions of successful American models like eBay, eHarmony and Zappos.

“Culturally, we saw the same qualities in the Citydeal team that we have at Groupon,” Mason said. “Hardworking and scrappy, blindingly fast executors, refreshingly blunt, no appetite for petty politics, and passionate about pioneering a new model of commerce while wowing every last consumer and merchant they touched.”

Mason said that for the time being, customers will need separate accounts to buy deals in Europe and U.S. That should change eventually, however.