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“It’s Been Fun While It Lasted” – A Gaopeng Tale

Gaopeng Tencent JV Groupon China SinkingAuthors: This post is co-authored by Duncan Leung

While at a tech networking event this past week we had the opportunity to speak with one of Gaopeng’s General Managers. Gaopeng is Groupon’s joint venture with China’s online giant, Tencent.  Everyone in China and in tech has heard of the bad press circulating Gaopeng, but we had wanted to get a first-hand account of what was really going on within the walls of Gaopeng, and the story was not encouraging.

A Glance Into The Mass Expansion of Gaopeng

We discovered that our GM at Gaopeng is currently an MBA candidate who had put his degree on hold after taking the position at Gaopeng.  At the time of our conversation he had only been with the company, and in China, for  7 months.  In this brief period, he recounted helping to establish 5 or 6 of the total 80 Gaopeng offices in various cities around China, including the offices in Suzhou, Chengdu, and Jinan. Apparently only “a couple of weeks” were taken to establish each of these offices, including setting up a location, and hiring a full staff.

We also inquired about his own expectations of Tencent’s role in the JV, especially with opinions from some voices in China that Tencent never intended for Gaopeng to succeed, but entered the partnership to block Groupon from becoming a real competitor, while building out its own services.  The response given didn’t show much confidence in the partnership either: “What any JV would bring; funding and advice”, but it seems Gaopeng really hasn’t seen much of either.


“It’s Been Fun While It Lasted”

At least in the Beijing office of Gaopeng, although rocky, it doesn’t seem that they will be bailing just yet.  When asked how things were going to proceed into the future, he responded that they would stay in the game as long as Tencent and Groupon wanted to play, and if anything, he had a year commitment on his term in China. “It’s been fun while it lasted,” he summed up.

Gaopeng has seen better days…but even those days were far from pleasant.  Riddled from the begining with problems, Groupon seems to be a gymnast that stumbles at the begining of her set and never regains the poise necessary to perform.  Groupon’s CEO, Andrew Mason, seems to be oblivious to what’s going on, but then again perhaps he’s playing cheerleader because to openly admit the problems would be the poison pill that ends it all.  This excerpt from a leaked internal memo published by Kara Swisher says it all.

What about our joint-venture with Tencent in China? Did you read the article that Gaopeng’s CEO has kidnapped the first born children of all our employees and is putting them to work building a laser beam he’ll use to slice the moon in half? It turns out that that one isn’t true either. China is definitely a different market, but every month we inch closer to profitability. As has been our strategy in launching other countries — Germany, France, and the UK, included — our China growth strategy was to hire quickly and manage out the bottom performers. So far, that strategy has improved our competitive position in China from #3,000 to #8. Will we one day reach the dominant status we enjoy in most (come on, Switzerland!) other countries? It’s too soon to tell, but there’s no question in my mind that we’re building a business that will be around for the long haul.

Mr. Mason may be attempting to keep morale high as they lead up to their IPO, but the boots on the ground know otherwise (probably most of all those that have lost their jobs in recent days).  As if things aren’t hard enough going on from here, Gaopeng will have an extremely  hard time looking for new talent with it’s marred reputation in China as a company going under.

It seems to me that Groupon has come to the conclusion that it doesn’t understand China, but they haven’t figured out how to deal with it.  It doesn’t look like Gaopeng is packing up  and going home, but they are defintely way up river without a paddle… and it also looks like the canoe might have sprung a leak.

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