AsiaInfo Services
02-18-2011
Groupon, Tencent Diverge over Expansion Strategy
BEIJING, Feb 18, 2011 (SinoCast Daily Business Beat via COMTEX) -- To online group buying bellwether Groupon, which wants to put expertise to good use in the Chinese market, its beginning in the country seems not well. Earlier, the company's strategy for oversea expansion is very clear, namely, to merge leading peers locally and rename them. That is what it did in Hong Kong and Singapore.
After mergers and acquisitions, Groupon will launch aggressive attack in the local market and snatch leading status through oppressive marketing and promotions. However, foreign Internet companies have all encountered setbacks in their expansion in the Chinese market. eBay Inc. (Nasdaq: EBAY), Google Inc. (Nasdaq: GOOG) and Facebook are good examples.
Hence, it is a better choice for Groupon to form a joint venture with Tencent Holdings Limited (SEHK: 0700). Groupon started its online group buying business from 2008 and has had experiences of nearly three years. Meanwhile, Tencent has strong brand influence among Chinese Internet users. Thus, their cooperation will achieve scale effect in the short term and greatly lower expansion costs.
The large user base of QQ, the popular IM tool of Tencent, makes Groupon ambitious. An email sent by a top executive of the US company says that it plans to boost the number of its Chinese employees to 1,000 within three months and aims to become the number one online group buying service provider in China.
An insider of Tencent reveals that the venture Web site between the two parties Gaopeng.com will focus on providing daily life service, promoting one single product or service every day. Meanwhile, Tencent will integrate Gaopeng.com into its community products.
The foray of Groupon into China has frightened its Chinese archrivals, which held meetings and form alliances, agreeing that they will not recruit employees that have worked for the US company.
Meanwhile, before Gaopeng.com has time to kick off attack on its Chinese archrivals, its shareholders have diverged on its expansion strategy. Groupon hopes that the expansion could be carried out as quickly as possible, because a success in the Chinese market will boost its market value in the upcoming IPO.
Besides, although an insider of Gaopeng.com unveils that the CEO of the venture appointed by Tencent is responsible for the overall strategy of the company, its daily operation is actually under the control of Groupon.
In the opinion of VC investors, the equity structure of Gaopeng.com has risks and the two parties, respectively taking a 50% stake in the venture, will probably fight for controlling right in the future. Tencent has showed its desire for power through the shutdown of Gaopeng.com, warning Groupon to listen to its advice in the Chinese market.
(USD 1 = CNY 6.58)
Source: www.nf.nfdaily.cn (February 18, 2011)
KEYWORD: BEIJING INDUSTRY KEYWORD: Internet & Online Services & Media SUBJECT CODE: Internet & Online Services
Internet Search Engines
SinoCast China Business Daily news
SinoCast China IT Watch
group buying
expansion
Internet
venture
cooperation
US
IPO
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