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The world's most popular Internet search engine provider Google Inc. recently launched a new digital coupon offering, Zavers, in a bid to reap maximum benefits from its search engine business and expand its online shopping business.

The new service will allow retailers and manufacturers to reward shoppers with relevant coupons, expand reward programs and track redemption of the coupons. Customers can save the Zavers discounts, which they find on retailer websites, to their accounts. Coupons will be redeemed and savings deducted automatically as soon as they check out.

In September 2011, Google acquired Zave Networks, which specializes in digitizing coupons and loyalty rewards programs. Zavers is Google’s first product based on this acquisition. Some of Zavers’ partners include A&P, The Food Emporium, Price Chopper, Superfresh and Pathmark.

This service has the potential to strengthen Google’s foothold in the retail world and help it to expand services like Google Wallet in the long run. Customers using Google Wallet can redeem the Zavers coupons instantly by using their phones at the checkout point.

Coupons often induce consumers to buy items that they initially may not have intended to, increasing the number of users and hence expanding the revenue base for the seller. Google’s platform is expected to help retailers update their data and promote their businesses by better targeting coupons. This, in turn, is expected to improve their return on investment (ROI).

Coupon marketing is gaining popularity and the Internet is fuelling this growth. Consumers gain from this form of marketing as coupons enable them to buy premium goods and services at lower prices. It is also ideal for small enterprises to market and promote their businesses. In the U.S., Groupon Inc. (GRPN - Analyst Report) and LivingSocial.com are the dominant players in the segment.

In April, Internet users in the U.S. made about 80 million searches using Google's shopping-search site, while eBay Inc. (EBAY - Analyst Report) and Amazon.com Inc. (AMZN - Analyst Report) handled about 900 million and 335 million searches, respectively, according to research firm comScore Inc. These figures indicate that although Google is the leading search engine, it could gain from boosting shopping-related searches.

Google has done well in the third quarter, with its gross revenue touching a record $14.10 billion. Revenues from both Google-owned and partner sites continued to grow in double digits on a year-over-year basis. Historically, Google has always fared better than Yahoo Inc (YHOO - Analyst Report), which has been struggling to hold ground and Microsoft (MSFT - Analyst Report), which is yet to gain critical mass.

However, legal entanglements related to competitive matters or patent infringements remain an overhang. Google retains a Zacks Rank #3 (Hold).

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