Groupon for one, please.

For $6 billion, this site would be sold in a nanosecond (possibly with a kidney included), but Groupon looked the multi-billion dollar offer in the face and decided to walk away. Chicago Breaking Business {via TechCrunch} reports that two sources close to the deal have confirmed that Groupon has decided to stay independent, possibly in advance of a IPO filing, though a decision on that won’t come until 2011.

How could anyone possibly walk away from $6 billion? According to Kara Swisher at AllThingsD, the $500 million annual revenues that everyone’s been tossing around (including us) are actually closer to $2 billion. While that figure doesn’t take into consideration what Groupon pays out to merchants, most estimates have Groupon taking a 50% cut of each deal that passes through its site, which means the company could be seeing $1 billion from the deals that pass through their system. Considering this is still in a span of just 2 years, heading for an IPO might make more sense. With their own focus on acquisitions – of both smaller companies outside the US and new customers – Groupon hasn’t been resting on their first to market status to grow, and it’s obviously working out amazingly well. If they hit $3 billion in revenue next year, an IPO could easily see the company valued at much more than the $6 billion Google offered.

Only time will tell if this is the right move: when Facebook turned down a $2 billion offer from Yahoo!, many observers who’d seen Friendster’s rise and fall thought it was a risky move. Today the company is valued somewhere close to $50 billion and it looks like the right bet. As successful as they’ve been, it’s still impossible to know for sure if Facebook will continue to hold the number one social network spot that MySpace once held, and officially conceded. For Groupon, the loudest criticisms of their multi-billion dollar valuation have been over the fact that the model can be easily duplicated, and that there’s not much that would keep someone loyal to Groupon exclusively.

While they may not be the only daily deal site that customers keep up with, Groupon is quickly turning the space into a winner take most market and sometimes that’s enough to build a defensible business on. The momentum Groupon has going for them at the moment may be a challenge to sustain, but it would be an even tougher battle for competing companies to overtake them.

Meanwhile, this puts Google back to square one. Amazon recently offered competitor LivingSocial $175 million, BuyWithMe is the next largest competitor, but not in enough cities for Google to spend money on an acquisition rather than trying to build its own product and sales force. Will we see Google Deals/Goopons making their way into local listings? Google branded products have been hit (Maps, Earthview, Gmail, News) and miss (Video, Buzz, Wave, Froogle, Base) so it’s difficult to say how they’ll move forward, but we can’t see them walking away from the  daily deal model after what was on the table.

Launched 10 months ago, BuyWithMe already sees 110,000 visitors per month (according to Google Ad Planner) which is impressive for a site that’s been around for less than 10 months. Impressive until you find out that 18-month old Groupon receives 5.1 million. How do you grow a website in a market where the leader has an 8-month head start, deep pockets and first mover’s advantage?

Buy With Me CEO Cheryl Rosner

“Our purpose is supporting the local communities we’re in,” says CEO Cheryl Rosner. Throughout our conversation Rosner, a former president of Expedia and Hotels.com, emphasizes the focus on creating value for merchants and buyers. “Our position is consistent. It’s to know our consumers well, to create local experts. What we find is that since we have such a strong reputation, the type of consumer we deliver has encouraged a lot of merchants to work with us.”

But when another site is around the corner, able to offer an even larger flood of shoppers, is that enough to give BuyWithMe a competitive advantage for unique offerings? For Jamie Ahn, owner of Manhattan’s Townhouse Spa, it is.

“From what I’ve seen, the quality of their clients is similar to our existing clientele. There’s a lot of crossover, which is a good reflection. We want people who return, not just people looking for discounts,” says Ahn, who was also approached by Groupon but decided to go with BuyWithMe instead.

A quick search turns up a review on Yelp that shows that it’s a position that works for consumers as well.

“Went there tonight after buying a package at http://www.buywithme.com… After a long week of work this was an absolute treat!! I plan to go back!” – Pedro M. via Yelp

The smaller, targeted audience that BuyWithMe offers was actually an advantage for Ahn. “That short term gratification (of a high volume sale) can kick you in the butt depending on what business you’re in. Another spa sold 3000 massages on groupon, but most people will book during peak hours like all other clients. So you’re going to lose out on existing clients in the long run.

You get that amount in one check right away, but you don’t want clients feeling like they’re 2nd tier either and complaining to both establishments. We did a lot of research and looked at our capacity, looked at the model with other businesses they had. It was high enough that we didn’t have 1000 people we didn’t want, but the clients who purchased the deal would get the same service we usually provide. We don’t want to compromise on quality and BuyWithMe worked with us on adding value rather than cutting the price down to a level that we couldn’t sustain long term.”

Indeed, one of the frequent comments on articles discussing Groupon focus on the sustainability of the model for the merchants offering the deals. For small businesses who don’t have multiple locations or the staff levels to handle a sudden influx of thousands of new customers, BuyWithMe’s smaller size could prove advantageous when targeting local partners. For shoppers, knowing that there won’t be a backlog of appointments or reservations could easily make the offerings on a smaller site appealing.

“We currently work with partners in different markets,” says Rosner. “In San Diego we work with the local ABC affiliate, in Boston we work closely with Boston.com and have since founder Andrew Moss started the business. We’ve found that’s a very valuable and good way for us to enter a local market.” By year’s end, BuyWithMe has plans to expand from 4 cities (Boston, New York, San Diego and Washington, DC) to 20.

While they are likely markets that their larger competitor already exists in, a focus on local partnerships and more manageable responses for small businesses could easily leave room for multiple local deal sites to successfully co-exist. In fact, as the number of local deal sites continue to grow, the stiffest competition may come from a site like Gilt City rather than Groupon. Rosner’s had success in establishing sites in the very crowded, very competitive travel market before though, so don’t discount Buy With Me just yet.