Google to Launch Groupon Rival

NEW YORK (TheStreet) -- Google(GOOG) is launching a daily deals service similar to Groupon and LivingSocial -- the two market leaders -- called Google Offers, in attempt to break into the lucrative small business advertising market.

Users will receive daily e-mails with a local deal of the day, which is triggered if enough people sign up for the coupon, according to Mashable, which first reported Google's new service. Google Offers will be powered by Google Checkout.

This isn't Google's first try at moving into the local daily deals space. After failing to acquire Groupon for $6 billion last year, Google VP of geographic and local services Marissa Mayer said the search giant was looking at using its own technology to launch a coupon-like service for local merchants.

But while the barriers to entry for launching a daily coupon service are relatively low, start-ups already serving the market have a huge leg up on Google: They've already amassed the massive sales force and scale necessary to work with myriads of small businesses around the country (and in some cases, overseas markets).

However, while Google lacks the existing relationships and pull with mom-and-pop shops, analysts believe the search giant's strong brand name and billions of dollars in revenue will give it an edge.

"Google wants to be No. 1 or not involved," said Clay Moran, an analyst with the Benchmark Company. "It doesn't have the people and the sales force yet, but it looks like it's willing to commit the money to build that."

Local online advertising within the U.S. in 2010 accounted for 15% of the total advertising pie, and is estimated to increase to 24% of the $145 billion market by 2014, according to consulting firm BIA/Kelsey.

Its core search product aside, most of Google's success developing new ventures has come via acquisition, like YouTube, DoubleClick (display advertising) and the Android platform (smartphones). Google's decision to build its local business internally could be part of a new strategy to focus on internal development and innovation, now that co-founder Larry Page has taken the CEO role, Moran said.

As Google has fought recently to keep engineers from defecting to Facebook and other nimble Internet companies, Page was reportedly brought in to run the company more like a start-up, say analysts.

Google fell 2.4% Friday to close at $611.83.

--Written by Olivia Oran in New York.

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