The following is a guest post from Chris Ke Sihai, Curator of TEDxMonga, and Creative Consultant at Enspyre.
I received a lot of mails from friends on the mainland late last year telling me to jump on a plane, résumé in hand, to take advantage of Groupon’s hiring spree in China. But as news of last week’s firings sink in, I have to ask what Groupon is really doing in China.
For one thing, there is the perennial question of whether Groupon anywhere is really a sustainable business model. It is, after all, built largely on the last gasps of expiring businesses that are desperate to bring in customers in the hope that they will come back and spend real money. The reality (and I speak from personal experience) is that the customers are, by definiton, cheap and will go off to chase the next bargain rather than buy the full-price something the advertiser so desperately needs them to buy.
It’s no surprise that I hear mutterings from tech-watchers about the company being over-valued, and of course China is part of the story contributing to that valuation. So what’s really going on?
A friend of mine, until recently very gainfully employed at Groupon China, told me that she anticipated being laid off after the IPO we’re all waiting for. Her rationale was that once the company starts being bound by the laws of economics, rather than the peculiar standards of rising internet stars, the expense will be unsustainable and the rewards too meager. As an insider, closely involved with the daily realities of customer acquisition and brand-building, she didn’t see a future for Groupon in China, and had another job lined up ahead of this week’s “surprise” announcement.
And who would? Another insider pointed out that they’re spending a fortune advertising in cities that are not even scheduled to be served by Groupon. Is this a cunning plan to create brand awareness ahead of time, or is there a lack of co-ordination between operations and marketing? Apparently the answer is that nobody knows, and there is no plan. With a young, aggressive and culturally inexperienced management team in place, Groupon China has simply been hurling money into a market it doesn’t understand, in the hands of people who don’t even speak the local language. According to CEO Andrew Mason, the strategy is to hire pretty much anyone and then fire the non-performers, if that sounds believable.
Scratching my head to understand this bizarre behaviour, I can only come back to the “unemployed after IPO” comment from my friend and compare that to the FT’s report that the venture has been given aggressive revenue targets ahead of the IPO. Is Groupon in China simply to excite gullible investors, and inflate it’s value, with no long-term game plan? Only time will tell, but don’t rush to invest.
Chris is Curator of TEDxMonga, and Creative Consultant at Enspyre. He is also working on a startup which aims to make money from people who have no money, and spends his spare time obsessing about systems and best practises. He is famous in Taiwan’s sailing community for sinking a yacht in Japan a few years ago. http://tedxmonga.com http://enspyre.com
{ 1 trackback }