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Groupon: Still Getting Pwned In China

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Andrew Mason has been visiting Beijing and Groupon HQ has finally realized there are some problems in China.

On the Forbes website, Rebecca Fannin reports:

CEO Andrew Mason just arrived in China and hasn’t wasted time shaking things up. Four expatriate executives at Groupon who were recruited from rival site Ftuan just a few months ago will be leaving Groupon China.

Update: Groupon has contacted us and denies the original Forbes report. They say that no expatriate executives have been fired or left Groupon China recently.

This seems to be a belated response to the very obvious problems at Groupon China that seasoned observers have been noting since the group buy website first opened up shop in Beijing and Shanghai:

Groupon China was started and has been managed by a bunch of trendy-looking but ineffectual foreigners who can’t speak Chinese and are completely clueless about China.

Firing four unnamed foreigners is not evidence that anything has changed.

Meanwhile, Bloomberg has this report (which I’d wager a PR company helped put together) talking up Groupon’s Chinese partner Tencent:

“Tencent’s scale and user base gives Groupon an advantage, and China’s group-buying market is still at an early stage and has a lot of upside,” said April Su, an analyst at iResearch in Beijing.…

“We think we’ve found an excellent partner in Tencent and we’ve been very pleased with the progress we’ve made,” Mason told reporters in Beijing today, before leaving Ouyang to field queries on Gaopeng…

Gaopeng is seeking an edge in China with “world-class brands,” like Apple Inc., Ouyang said today.

“Our strategy is very strict selection of the merchant deals,” Ouyang said. “It’s not only about discount service but it’s also about being a city guide, a lifestyle.”

A few problems:

1. Tencent will end up shafting Groupon
If the Groupon model works in China, Tencent has nothing to gain by partnering with Groupon. Tencent has its own Groupon style offerings, and there is no need to make Groupon work for them to profit by the model.

2. Apple and “lifestyle”: Ha ha ha ha ha ha ha

This is too rich:

Gaopeng is seeking an edge in China with “world-class brands,” like Apple Inc., Ouyang said today.

“Our strategy is very strict selection of the merchant deals,” Ouyang said. “It’s not only about discount service but it’s also about being a city guide, a lifestyle.”

So, Apple is going to sell discounted iPads in China?

Yeah right, why would Apple do this when there are already Chinese people willing to sell their kidneys to get an iPad, or get into fistfights at the Apple store just to get hold of one.

Apple and Groupon China? Simply ridiculous. Even more ridiculous is the “city guide / lifestyle” nonsense.

I first worked on city guide / lifestyle print magazines in the late 1990s in China:

There is a small amount of money to be made in city guides and lifestyle guide products in big Chinese cities. There is quite a bit more money to be made in Internet and media products that help position brands as desirable for the new rich and emerging middle classes (e.g. Cosmopolitan China magazine and Vogue China , possibly the P1 social network and the Financial TimesFT Rui magazine).

There is also money to be made and a huge user demand for Dianping, which is like the Yelp of China that offers real, honest user reviews of restaurants.

But, based on my personal experience since 1997, every foreign-funded company I have ever encountered in China talking about making money from local vendors based on a “lifestyle” proposition has about a year or so before bankrupting itself or being run out of town.

3. iResearch

A final note: I don’t know if Groupon is paying iResearch, but iResearch has a reputation in China for doing “research” for companies who pay them. Somehow, the companies always end up looking very good in their research reports.

It’s all pre-IPO spin. Groupon China is simply a way to bleed cash.

Update Apologies to anyone offended by the original title. It’s a reference to my previous post about Groupon. But since nobody got it, the headline has been changed.