'Fastest-growing company ever' hits lull, failed launch

Discount website Groupon has buyers in markets across the globe rushing for great deals, but this time it may have itself been too hasty in launching a bid.

After its China portal www.gaopeng.com went online on Feb 15 it was pulled out of service in less than 24 hours - by Groupon's own joint venture partner Tencent, according to Chinese media reports.

The Chinese version offering Groupon's famed deal of the day business model is now expected to be formally unveiled with Tencent this week.

But even the domain name has been subject to conflict.

The young US company headquartered in Chicago found that ideal names for its business in China - groupon.cn and groupon.com.cn - have both been registered by a Chinese competitor, so its joint venture turned to gaopeng.com for its domain.

The name appears to be derived from a Chinese phrase meaning "cherished friends sitting around the table".

Tencent, which is also a 10 percent stakeholder in Russian Internet firm Digital Sky Technologies, one of Groupon's backers, reportedly bought gaopeng.com for 980,000 yuan, or about $149,000.

Possible further delay

Now the launch date might be further delayed to March because "deals for products from local businesses have just began and everything has yet to be settled", MorningPost.com.cn cited an anonymous source close to Groupon saying.

Tencent has refused to comment on the temporary website shutdown and Groupon could not be reached for a response.

Industry watchers said the launch confusion might stem from Groupon's eagerness to show investors its expansion into China as it gears up for a public offering this year.

In contrast, Tencent elected to wait for "more appropriate timing", according to Chinese media.

Local media report that Groupon then took unilateral action to start the website last week and Tencent followed by pulling it off its server in China.

Yet another report contends the incident resulted from an engineer's error.

When up and running the website will be operated by a $100 million, 50-50 joint venture, according to reports, but neither side has confirmed details.

When the attempt to begin operation began last week, the joint venture had not yet acquired a business license from authorities, according to 21st Century Business Herald.

Oliver Samwer, who is in charge of Groupon's overseas market expansion, flew to Beijing last week for talks with Ouyang Yun from Tencent, who also serves as CEO of the joint venture.

Twists and turns

Called the fastest-growing company ever by Forbes, Groupon's business expanded from the United States to 34 other countries in 2010 alone.

Its Asian foray began last year when it acquired daily deal websites in Japan, Singapore, the Philippines and China's Taiwan province.

But the breathtaking worldwide expansion hit a lull on the Chinese mainland.

It approached major homegrown websites last year, but domestic players backed by venture capital said they would rather operate on their own and declined.

In early January, Groupon announced its intention to enter the mainland, saying that it would give up takeover attempts and team with Tencent, National Business Daily reports.

Energize industry

The cooperation between the biggest group purchase website in the US and Chinese Internet giant Tencent - which has the largest Internet registered user base in the country due to its instant messaging software QQ - is expected to energize competition in the domestic market for group purchases.

There were 2,162 domestically run websites for group buying in the country by the end of 2010.

Group buying portal Tuan800.com estimates the sector's combined revenues will surpass 16 billion yuan ($2.4 billion) this year, according to the Wall Street Journal.

Groupon will pour a significant portion of the $950 million in private capital it recently raised into its China operations, Sina.com reports.

It plans to increase its staff to 1,000 people within three months. Many of its Chinese peers say their employees have received job offers with better pay from Groupon.

Reports say some local websites have even reached an agreement that they would not hire people who have worked for Groupon.

While confidence by overseas companies in their China ventures often comes from their well-established brands, ample capital and global management expertise, domestic websites have advantages in offline services, cooperation with online sellers and customer loyalty, as well as their familiarity with the local business environment, remarked experts.

Well-known US companies such as Google, Yahoo and eBay started operations in China, yet homegrown companies including Alibaba, Baidu and Tencent still lead their respective fields.

China Daily

(China Daily 02/23/2011 page17)