If Google buys Groupon, what does that mean for the UK? Shakeout.

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As Google allegedly courts Groupon with acquisition offers of up to $6 billion, we thought it worthwhile to bring you an update on the UK ‘deal-of-the-day’ sites.

And perhaps the best way to think about this is in terms of supermarket brands. No, really, hear me out on this one, it sort of works.

As we know Groupon expanded into Europe by buying the discount supermarket of the space, the Walmart or Asda if you will: MyCityDeal. MyCityDeal was the pile it high sell it cheap of the pack, had the biggest volumes and was aimed at the mid-to-low tier discount space.

LivingSocial is another US entrant which is expanding across the UK, but we’ve heard that sales volumes are medium to low and seem caught between the cheap deals and the high end market.

KGBdeals is owned by The Number UK Ltd, otherwise known as “118 118″, a wholly owned subsidiary of US directory enquiries provider Knowledge Generation Bureau – hence KGB (not the old secret Russian police, as the name actually suggests – did no-one tell them this when they named it?). KGBdeals are the “Lidl” of the space since they are sending out deals based on what they can pack into the store cheap, just like Lidl.

The remaining players, Wowcher, Groupola, Crowdity are all much smaller in the space. Indeed, Groupola is doing the worst of these, we hear. Crowdity are only offering free deals (no commissions).

Lastly, based out of London and backed by Index Ventures and PRO-Founders Capital, Keynoir launched in April this year and claims to be the No. 2 player after MyCityDeal, but there is an important difference here.

It’s aimed at the higher end or quality end of the group buying market (let’s call it the Ocado / Waitrose of the pack). Alone among the Groupon clones it’s done things like do offers on 3 Michelin starred restaurants and locking in high-end providers to its deals so they don’t offer them on other sites. This “handpicked” approach offers deep discounts for a single day to trigger buying behaviour.

Can it possibly scale with this handpicked approach? CEO Phil Wilkinson tells me “Handpicked means we do more outbound sales than inbound as we like to lead with the people we want to feature first.” He says none of the sales are self serve and their editors see a place, talk to the owners, write up a deal, and get great photos.

That seems like a lot of work but Wilkinson insists it’s core to the brand and he wants to be to daily deal sites what “Mr and Mrs Smith” is to hotels.

However, he says this would not prevent a roll-out of the same model to other countries. Because of this high end focus, it’s aiming at profitability in January 2011.

I guess because of this, with the mark-up being so much bigger on each item, it could just about scale.

Of course, ultimately if Google buy Groupon, then it really will have the muscle to scale, possibly leaving a high-end player like Keynoir well alone to its richer pickings.

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