The long-running saga over the fate of Gaopeng, Groupon’s (NASDAQ:GRPN) joint-venture in China (with Tencent) is not over yet, with the most recent rumors today suggesting that a business merger between the troubled Gaopeng and FTuan is imminent. Reports in Yi Cai say that FTuan – which is a top eight deals site in China, way ahead of Gaopeng in terms of revenue – will merge with its rival to form a new group which FTuan’s CEO, Lin Ning, will oversee.
The Deus ex machina here is the local web giant Tencent (HKG:0700), which owns half of the Gaopeng business as a joint-venture partner, and has an undisclosed stake in FTuan as well. It’s believed that Tencent will ultimately control half of the group that will form out of this rumored merger. That gives Tencent even more clout in the group buy space (in addition to its dominance in social media and gaming in the country), since it also has its own QQ Tuan and Soso Tuan deals aggregators.
This move would see both the Gaopeng and FTuan brands continue to exist. Market data from 800Tuan states that the two sites have different demographics of users, with Gaopeng’s being more upscale and more likely to spend a greater amount of money on deals. And so the two can co-exist in a complementary fashion. Our most recent report on the Chinese group buy landscape saw FTuan retain a fairly strong 6.3 percent market share by revenue in a highly fragmented and competitive sector where costs are high – especially in terms of marketing – and profit margins are low.
[Source: Yi Cai – article in Chinese]