DEEP (digital media) THOUGHTS

With every passing day, it seems like prominent media sites/sources are publishing rumors news about Groupon's strategy for entering the large, chinese local advertising and ecommerce markets.

First, Techcrunch reported that Groupon was using a significant portion of its recent $950mm round to hire dozens/hundreds of Harvard MBAs and China McKinsey management consultants to build out a local presence themselves in China. Given Groupon's business model, and hiring practices in the US, it is questionable at best why hundreds of Harvard MBAs and McKinsey alums might want to move to China and become a feet on the street, smile and dial team to convince local merchants to use Groupon over the plethora of local competitors.

Then came the AllThingsDigital reprint of reports that Groupon would be forming a 50/50 JV with Chinese internet giant Tencent, to build out the next dominant ecommerce startup in China. This also seemed odd, since Tencent already has their own website in this space. It is not clear what Groupon could offer Tencent in China, as Tencent already has superior engineering/technology compared to Groupon, the largest community of Chinese internet users as their existing customers, and there is no shortage of people that Tencent could hire themselves to become salespeople to call up local merchants. All Groupon could offer is their brand name, which has little/no value to Chinese users, especially since another Groupon clone already launched the website Groupon.cn in China.

Then came another AllThingsDigital update on the Groupon China saga, stating that they are close to investing in leading Chinese daily deal website Lashou at a valuation of $1 billion. The most puzzling thing about this report, is that it came at the same time as another report that Chinese Groupon competitors were forming an alliance, and promising to blacklist any/all employees that were poached by Groupon in China, including Lashou.

All of this is enough to make anyone's head spin, but one thing is clear. Groupon desperately wants to enter the Chinese market to continue to drive their growth story to investors in their upcoming IPO (no doubt wanting to swindle all of the China un-savvy American investors who have bought into recent Chinese startup IPOs like Youku, with little knowledge of how the Chinese market works, and only drawn to the fact that the companies are large, growing, and focusing on the China market). Another thing is clear, and it is that Groupon has absolutely no idea what it wants to do in China, as it continues to stumble through new announcements of changes to their strategy, which is being covered by prominent US media sites/blogs that likewise have little knowledge of how the Chinese market works.

At the end of the day, it is clear that Groupon's international strategy is based around acquiring local players, and figuring out how to leverage Groupon's existing technology and economies of scale (if applicable) to those local markets around the world. They want to accelerate the growth of local players, unfortunately due to their blatantly American corporate culture and childlike ambitions to take over the world as quickly as they have taken over the US market, they are going to be in for some serious growing pains, and cultural lessons around the world. They should focus on securing their leadership in the US market and other markets culturally similar to the US, build out real technology that makes it easier for local merchants to self serve and monitor deals, and leave markets like China alone, and let local companies figure out how best to fight for market share there.