Groupon’s Australian operation Star Deals has acquired Melbourne-based group buying site Crowdmass for an undisclosed sum.
Crowdmass was founded in 2010 by high school friends Tim Wu, David Wei and Ying Wang, all of whom are university graduates aged just 22.
In 2009, the trio won the Student Entrepreneurs IdeaPitch competition, setting in motion the launch of Crowdmass in May last year. Wei says he and his business partners always wanted to start a business.
“We’re all pretty conscious with our bargaining and getting good deals ourselves, so we had a look around on the internet to see what ideas there were,” he says.
“And we thought, how about using the power of bulk buying to get discounts?”
The trio was responsible for every aspect of their site, including marketing, sales, site maintenance and customer service. They took in almost $40,000 on one of their very first deals.
After only one year in operation, the founders had sold their business to Groupon, which has been operating in Australia under the name Star Deals since February.
Star Deals managing director Alexandra Podeanu says the purchase was more of a talent buyout rather than a strategic acquisition.
“Our plans are to grow organically. Crowdmass is more a talent buyout. We were impressed with them and their business model, and wanted them on our team,” she says.
Podeanu says Star Deals has no plans for further acquisitions in the near-term.
When asked whether she believes Groupon will overtake the current group buying market in Australia, Podeanu said: “We are feeling very confident. Absolutely we want to be number one.”
“This is what we will be fighting for everyday. I expect we will be a top three player by the end of the year,” she says.
Sam Yip, senior research manager at analyst firm Telsyte, says he’s surprised Groupon chose to acquire such a small company.
Yip estimates the deal at under $1 million and says it is likely Groupon is taking a “sandwich approach” to expansion – acquiring at the smaller end of the market before buying larger players, such as Scoopon.
“It looks like Groupon is looking to acquire at the lower end of the market. Everyone expected their first acquisition to be a much bigger operator,” he says.
“Crowdmass is very small. They’re obviously looking to build their database.”
Crowdmass will be merged under the Groupon banner, with all traffic diverted within a month. The three founders will work in project-based roles, with Wu focusing on technical, Wang on marketing and Wei on sales.
Groupon’s talent buyout strategy mimics recent moves by Google, which has embarked on an aggressive hiring surge as it seeks to attract “top talent” from around the world.
“We’ll hire as many smart, creative people as we can,” a company spokesperson has said.