Groupon went public three years after its establishment, which was a “miracle” in tech field at the time.
Meituan was listed on the Hong Kong Exchanges on Sept 20 this year, with a market value of more than $50 billion, exceeding that of Xiaomi and JD and becoming the fourth largest Internet giant in China after BAT.
Wang Xing, Meituan’s founder, set up his first business 15 years ago. He once established Duoduoyou (a social web), Youzitu (a web for photo processing), renren.com (a real-name social platform), Fanfou (a social web), Hainei (another social web), and Meituan. He was once called the “serial entrepreneur” who repeatedly tried and failed, but continued to try. Wang’s motto “keeping living forward” is also popular in the WeChat Moments of Momentum Works’ staff.
As always, Momentum Works analyzes Meituan’s pattern from an international perspective. Let’s go back to the era of “Cope to China” and look back at Groupon, the founder of the group-buying and the one imitated by Meituan.
It was the God favored one.
Pinduoduo went public three years after its establishment, and this was considered a miracle. Such miracle once happened in U.S., and that miracle is Groupon. At the time, Groupon was considered “the fastest growing company ever”.
The fastest growing company ever (Forbes 2010 cover)
In October 2008, Groupon launched its first buy-one-get-one-free pizza AD. Then the site (attention please, it’s a site) drew so much attention and started to grow so quickly that it had a million users in a year. And it only took 18 months for its sales to soar from zero to $500 million.
In 2010, Groupon expanded from the U.S. to the world, and landed in more than 500 cities in 46 countries over a year. (The model was also introduced to China in 2010, which led to the fierce battle among numerous group-buying service providers.) At the end of 2010, two Groupon founders rejected Google’s offer to buy Groupon for $6 billion.
Investors didn’t want to miss out on the $10-billion opportunity that was so closely related to daily life. (Or in today’s case, it is a $100-billion opportunity.)
When Groupon went public on Nasdaq in 2011, only three years after its establishment, it was the second largest IPO among tech companies at the time, with a market value of up to $16 billion. No one could match up to Groupon.
But then?
Going public seems to be Groupon’s highlight moment. As is shown above, Groupon’s share price has been plummeting since 2012, from a peak of $16 billion to more than $2 billion today.
Its turnover is also declining year by year:
Suffer from listing
After Groupon went public, the operation data of group-buying model came to light, and the low retention rate was unveiled. People cast doubts on the future sustainability of this model, and even called it as Ponzi Scheme. Besides, Groupon had long standing problems with financial statistics and disclosure, adding to distrust from investors.
In 2012, Groupon pulled out of the Chinese market after it was restructured. At the time, Wang spoke publicly about Groupon’s problems. First, its equity structure needed improvement. Second, there was no magic team. Groupon’s DNA was not ideal from the beginning. Its staff came from different countries and many positions were redundant. Third, Groupon didn’t choose a right time to set up a joint venture. As time is limited, it was too hasty in entering the Chinese market.
The prototype of Rocket Internet?
What many may not know is that Samwer brothers who later founded Rocket Internet were responsible for Groupon’s landing in China.
Samwer Brothers
Why them? When Groupon was growing rapidly in the U.S., Samwer brothers quickly replicated this business model in Germany, setting up the CityDeal. By the time Groupon expanded business in overseas market, CityDeal already had large business in Europe. Groupon, which needed to expand rapidly overseas, chose to merge with CityDeal. Samwer thus took a large stake in the merged company and also gained operation right in overseas markets.
Samwer brothers sent many young Europeans to China as city managers, which is exactly how Rocket operates much of its business.
Groupon homepage is not down-to-earth at all
This style helped Groupon to lead other competitors by quick decisions in the reduction-dimension market in early years. Unfortunately, the disadvantage of being not down-to-earth is clear in Chinese market which has large volume and where competitors have abundant capitals.
From 2013 to 2016, several core Momentum Works staff liked to recruit former Groupon ground promotion and sales staff when rocketing Southeast Asia. This is because these people are generally able to withstand great pressure and are very sensitive to KPI.
Unfortunately, Groupon hasn’t had much strategic vision or commitment.
Downhill
Groupon has made frequent changes to save itself since 2012, but each reform aimed at boosting revenue in the short term, to make financial statements look satisfying.
Since 2015, Groupon has also begun a massive retreat from its overseas operations, laying off 1,100 people at a time, leaving Greece, Turkey, South Korea, Morocco, Panama, the Philippines, Puerto Rico, Taiwan, Thailand, Uruguay, Sweden, Denmark, Norway and Finland.
What about Meituan?
Groupon’s listing was also the start of its nightmare. Perhaps for this reason, Meituan is reluctant to put listing on the agenda. “The industry still has much room for potentials and we should not be tied down for going public,” Wang told the media. He added that, “after going public, Meituan will be held accountable for the public. We will be pressed to pursue short-term performance. It is not the optimal choice for the industry with much imagination.”
Meituan now has very different business with Groupon today. Meituan has four business lines, including to home delivery, purchase at stores, hotel and travel. And Meituan has been expanding its boundaries and trying to form its own ecology.
Business scope and size of Meituan (excerpt from prospectus)
Momentum Works believes that the biggest difference between Meituan and Groupon may be strategic thinking, the ability to reinvent themselves and not be affected by short-term gains.
It’s also the biggest difference between Meituan and many group-buy providers during the 2010 battle.
Meituan’s overseas explorations
Groupon began expanding abroad two years after its founding, While Meituan is much more cautious. It has carried out a lot of investigation, thought a lot, but was till very cautious in taking action.
In this January, Meituan invested in Go-Jek, and in February, it invested in Swiggy, Indonesia’s largest food delivery platform. Both are following investment and the amount is not very large. But the successive investment in ride-hailing and takeout in Indonesia, a populous country, is undoubtedly laying the groundwork for going global.
In 2017, Wang expressed his views on globalization at a public meeting. “In the Internet space, the Chinese experience and Chinese solution may be used for reference in developing countries than the U.S experience and U.S. solution. In fact, the business model of Chinese companies has become a model for global emerging markets, which is the best time for Chinese companies to go global,” he said.
Meituan’s business model is also being imitated by overseas companies, such as Fave, a Malaysian group buying site.
The founder of Fave was the former head of Groupon Malaysia. Although the time when group purchase had greatest investment potential has passed, Fave goes against the current. Indeed, there is no single company monopolizing the sector in Southeast Asia.
Fave successively acquired/took over Groupon’s operations in Malaysia, Indonesia and Singapore. Fave is also pushing its own payments, attracting more customers by offering bigger subsidies than its rivals.
The challenge for the Fave, however, is that it does not have enough ammunition and “troops” on hand to roll it all out, to achieve the goal that users cannot live without. If you go shopping in the major countries, you can see Fave, but the penetration rate is limited.
To fully capture the market, Fave needs much more money and more aggressive team.
On September 6th, Fave announced that it had raised $20 million from investors including Sequoia Capital India, Ventura Capital and “unnamed” Chinese investors.
It is rumored that the Chinese investor is Meituan Dianping.
Twenty million is not enough, but it is also a start to prove itself.
