Groupon: "Getting It In The Ass" In China

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A Global Mobile Internet Conference kicked off last night in Beijing. The opening event was an on-stage interview by Barrett Parkman with John Liu, head of Google’s China operations, followed by a panel discussion with several entrepreneurs and executives from MSN and Zynga.

The interview was titled “How foreign companies can succeed in China”, a rather amusing title considering that no foreign Internet company has ever achieved a dominant position in the People’s Republic. Cynics in the audience joked that after Google’s famous partial withdrawal from China, John Liu’s presentation should perhaps been called “How foreign companies can fail in China” and name checked eBay, Yahoo and MSN as foreign companies whose performance in this market can best be described as mediocre.

Liu’s interview and most of the panel discussion was all vanilla until Groupon was mentioned.

Panelists Alvin Wang Graylin (CEO of mobile search provider Minfo) and Dominic Penaloza (CEO of Ushi, a LinkedIn clone) talked about the high numbers of non Chinese speaking foreigners who are running Groupon’s China operations – a classic mistake made by foreign companies in any industry in China. Kaiser Kuo (head of international communications for Chinese search giant Baidu) mentioned Groupon’s famous Superbowl commercial which managed to enrage both the free Tibet crowd and Chinese nationalists in the same week Groupon launched in China, and the sudden departure of their China sales director after a few weeks on the job, which everyone in China tech circles knew about immediately because he publicized on his Weibo (Sina.com’s popular Twitter-like service).

The only nice thing anyone had to say about Groupon was that they have just succeeded in purchasing the domain name Groupon.cn from one of the thousand-plus Groupon clones that are already operating in China.

Kuo crisply summed up the prevailing sentiment: “Groupon is getting it in the ass”.

Update: Kuo emailed me the following correction:

I don’t think I actually said “getting it in the ass” in that context; I think I used the phrase talking about how there’s lots of people with wise advice on how not to get it in the ass in China, but that Groupon seems to have ignored it all.

I however will stand by the headline of this post. While there are plenty of people who think Groupon’s pockets are deep enough to make up for their mistakes so far, I’m not one of them.

Update 2:

Kai Lukoff of Techrice recorded the discussion and provided this transcript of Kuo’s remarks:

They seem to have done everything ass backwards. This is a business that is built on selling to locals and yet their head of national sales is a foreigner, doesn’t speak particularly good Chinese. I’m not convinced this isn’t just window dressing for an IPO–I am not absolutely convinced that they are serious about playing in this market. They seem to have ignored the accumulated wisdom of many years of non-Chinese companies coming in and completely getting it in the ass.

I still stand by the headline of this post.