Groupon’s China business to merge with Tencent
Group-buying website Groupon is merging its China operations, known as Gaopeng, with a similar site owned by domestic internet company Tencent Holdings. Gaopeng was created in late 2010 as a joint venture between Groupon and Tencent. The Tencent Collaboration Fund and Yunfeng Capital, an investment firm set up by Focus Media’s David Yu and Alibaba Group’s Jack Ma, invested in the new firm.
Following the merger with Tencent's FTuan, Gaopeng will continue to operate under its own brand. The move is seen as a means of deepening the Groupon-Tencent partnership, and it comes as participants in China's group-buying space struggle with significant competition and low margins.
According to iResearch, FTuan was the ninth most popular group-buying website in China last month with an average of 566,000 daily page views. Gaopeng placed 10th with 486,000 views. Meituan, which has received $70 million in VC funding from investors including Sequoia Capital, Northern Light Venture Capital and Walden International, is the market leader, with 4 million average daily page views.
Although China's group-buying market generated revenues of RMB4.3 billion ($676 million) last year, up from RMB1.5 billion in 2010, it has become highly saturated. While Groupon faced relatively little competition when it emerged in the US, often buying up any would-be threats, it is estimated that China saw 3,600 market entrants in 2010 and 2011. Industry sources say 10% of these received VC backing.
In April 2011, Lashou announced it had raised $110 million in Series C financing, despite having a corporate history that stretched back barely 12 months. This took the company's total capital raised to $166 million across three rounds, with backers including GSR Ventures, Tenaya Capital and Norwest Venture Partners.
The problem is that low barriers to entry have created massive price competition as participants seek to gain market share. There is little loyalty from merchants because the competing platforms are so similar. It was reported last August that Gaopeng had closed 10 offices and fired about 400 staff over the previous three months.
Consolidation is already taking place, with iResearch estimating that the number of market participants is now down to 1,000.
More on Technology
Latest News
Asian GPs slow implementation of ESG policies - survey
Asia-based private equity firms are assigning more dedicated resources to environment, social, and governance (ESG) programmes, but policy changes have slowed in the past 12 months, in part due to concerns raised internally and by LPs, according to a...
Singapore fintech start-up LXA gets $10m seed round
New Enterprise Associates (NEA) has led a USD 10m seed round for Singapore’s LXA, a financial technology start-up launched by a former Asia senior executive at The Blackstone Group.
India's InCred announces $60m round, claims unicorn status
Indian non-bank lender InCred Financial Services said it has received INR 5bn (USD 60m) at a valuation of at least USD 1bn from unnamed investors including “a global private equity fund.”
Insight leads $50m round for Australia's Roller
Insight Partners has led a USD 50m round for Australia’s Roller, a venue management software provider specializing in family fun parks.