Groupon's China venture posts US$46M loss

Revenues for Groupon's China business in the past nine months were $2.1 million

Groupon's China venture posted a net loss of US$46.4 million for the past nine months, generating only $2.1 million in revenue as it fights to gain dominance in the country's highly competitive group buying market.

The figures were reported in the company's latest securities filing on Friday. Groupon's China business, called GaoPeng, launched its first deals in March, competing against more than 3,000 other rival group-buying sites in the country. GaoPeng is a joint venture that includes Groupon and the Chinese Internet firm Tencent.

The fierce competition has meant high marketing costs and lower profit margins. Analysts and industry executives expect many companies in China's group-buying market will eventually run out of cash and fold.

"This is a market in which most companies have a gross margin of five percent," said Mark Natkin, managing director for Beijing-based Marbridge Consulting. "That's not a viable business. Being able to make a gross margin of 20 or 30 percent really only happens when you boil the market down to three or four top companies."

China's group-buying companies have yet to make a profit, Natkin added. At the same time, companies including GaoPeng have been forced to lay off employees in order to compensate for shrinking budgets, according to analysts.

Groupon could not be reached for comment. But the company's CEO Andrew Mason defended its China business in August in an email to employees, which was included in the securities filing.

"China is definitely a different market, but every month we inch closer to profitability," he said. "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 number 3,000 to number eight."

Groupon's global operations excluding GaoPeng recorded a net less of $214 million for the first nine months of the year, according to the securities filing. That happened despite its revenue reaching $1.1 billion, up from just $140 million in the same period a year ago.

Part of the reason is Groupon spent a lot more on marketing. For the first nine months of 2010, it spent $89 million, but for the same period this year, it spent $613 million.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issuese-commercefinancial resultsGaoPenginvestmentsGrouponinternet

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Michael Kan

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?