Google Eats Its Own Tail, Competes With Investment

Today's launch of Google Offers, the Groupon competitor from search behemoth Google, highlights the declining state of affairs at Mountain View. Not because it is branching out into yet another venture that takes it away from its core business, but because it is now in direct competition with its own investment.

I'd imagine Seth Priebatsch is feeling bit by the hand that fed him.

picture via staplenews.com

Priebatsch, the 22 year old founder (and as is obligitory to mention when speaking of him, Princeton dropout) of Cambridge based LBS game SCVNGR, went live with LevelUp in March; a tiered, rewards driven deals site that aimed to draw upon SCVNRG's existing user base and percolate into the general public. LevelUp's immediate success has been so good in its initial cities (Philadelphia, San Fransisco and Boston) that Preisbatch has received "nasty emails from competitors," a sure sign that he must be doing something right. LevelUp is planning to expand into all major cities and take some market share from the big 2 in the industry, Groupon and LivingSocial.

Here's the rub; Google has a significant amount of money tied up in SCVNGR; in addition to the $4 million that they invested in late 2009, they were also involved in the latest round of funding for the game, in January of this year, a round that brought the company $15M.

With the launch of Google Offers today, the boys from Mountain View will be directly competing with the company they felt confident enough to pour a large chunk of money into, while it's still in its infancy. Considering it is still in its pilot program and barely one quarter old, I can't imagine that there has been great experience to be shared from LevelUp yet, which might have justified the recent investment. Did Google disapprove of the expansion into deals by SCVNGR and it's Wonderkid prodigy? Only time will tell if this helps Google, helps SCVNGR, helps LevelUp, but for right now it feels like a ill-advised move into an investment's market.