Groupon Doubles Down on Its POS Thrust with Acquisition of Hospitality App Startup

Groupon Inc. redoubled its efforts to penetrate the point-of-sale market with its acquisition of New York City-based software startup Breadcrumb, whose product lets restaurants run transactions on iPad tablets. The deal, announced on Tuesday, follows news that the Chicago-based daily-deal giant is testing a mobile-acceptance service in and around San Francisco that relies on iPod touch devices.

Terms of the Breadcrumb deal were not disclosed, and a spokesperson says Groupon will not comment on it beyond a blog item posted by Mihir Shah, the company’s vice president of mobile. “The team behind Breadcrumb shares our passion to build affordable and intuitive products that make it easier for local merchants to manage their business,” says Shah’s post.

Breadcrumb is one of a number of application developers that have targeted the hospitality industry, with Austin, Texas-based Tabbedout being one of the most prominent. Two-year-old Tabbedout, which features apps for both merchants and customers, claims more than 400 client restaurants and offers PayPal integration as well as card acceptance. Users’ card information is stored locally on their phones.

Breadcrumb lists 20 clients on its Web site, all or mostly all in and around Manhattan. Its application helps restaurateurs take orders, manage checks, lay out floor plans, and run various analytic routines in addition to payment acceptance, which includes cash and cards. Card acceptance relies on a separate card-swipe device. All data are stored on an Amazon server in a cloud-based configuration. The company charges monthly subscription fees ranging from $99 to $399, depending on how many iPads a restaurant needs. The company says a version of Breadcrumb for iPhones and the iPod touch is in development.

Groupon is reportedly equipping merchants with the iPod touch for its San Francisco pilot, a venture in which it appears to be preparing to compete with Square Inc., PayPal Inc., VeriFone Systems Inc., Intuit Inc., and a raft of other vendors providing mobile card acceptance. The project, about which Groupon has been mum, was disclosed late last week in separate online reports appearing in VentureBeat and Bloomberg News.

While Groupon is saying little about its POS thrust, outside observers say it’s likely the company’s interest in the point of sale stems from a need to streamline the process of coupon redemption. “For daily-deal providers, redemption is one of the weak links. It’s a customer and merchant frustration,” notes one expert who prefers not to be named. By providing payments and other services to merchants, Groupon can open a channel through which it can also provide redemption software to the point of sale, this observer says.

Other observers agree. “Offers and payments are going to come together,” says Todd Ablowitz, president of Centennial, Colo.-based consultancy Double Diamond Group LLC. “It’s logical [Groupon] would want to take some approach to connect offers and redemption.”

As for the crowded mobile-acceptance market, there may yet be plenty of business to go around, given that most of the users are very small merchants. “You can’t ignore the opportunity in payments,” says Ablowitz. “The total available market is pretty large. It’s pretty logical [Groupon] would want to get in on that gravy train.”