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Rumor: Groupon, Tencent JV Faces Corporate Culture Clash

21st Century Business Herald, 2/17/11

Oliver Samwer, president of Groupon's German subsidiary CityDeal and head of Groupon's overseas market expansion efforts, flew to Beijing today for an emergency meeting with Ouyang Yun, CEO of Groupon's new joint venture with Tencent (0700.HK), to smooth out the relationship between the two companies, according to industry sources. One source close to Groupon claimed that if negotiations continue to be deadlocked, the partnership will dissolve.

Tencent declined to comment on the rumors.

On February 16, after CityDeal brought Groupon's China website online briefly, Tencent went into crisis mode and shut down the website's China servers. The joint venture, Gaopeng.com, is operated by Tencent and CityDeal, and the incident reputedly mirrors the gap between the two companies' strategic approaches to the China group buy market.

According to an HR staffer at Groupon China, Groupon's Beijing and Shanghai offices are expanding fast, and have dozens and even up to 100 job applicants coming in each day. According to an internal source, the two offices currently employ over 300 people combined and plan to expand to more than 500 total employees.

Groupon is also reportedly paying large salaries. A sales department manager who is favored by the Germans is reportedly receiving a monthly base salary between RMB 20,000 and RMB 30,000, while the lowest sales employee salary starts between RMB 2,500 and RMB 3,000. According to the same inside source, the entire senior management team is empowered to hire new employees and has a lot of leeway, creating significant confusion.

A source close to Samwer claims that his strategy in China is "faster is better," and that Tencent is not pleased with Groupon's rapid expansion, saying that Tencent wishes both the website launch and recruitment process would slow a bit.

Aside from differing opinions on the pace of expansion, Groupon and Tencent have a wide difference of opinion when it comes to merchant selection and content descriptions. Groupon, based on its overseas experience, wants to keep merchant standards high while preserving its signature style and using plain language and minimalist site design. Tencent, on the other hand, wants to follow the traditional China group buy site model with flowery, ornate prose and busier site designs.

According to an industry insider, though Ouyang is technically in charge of strategy as CEO, in reality the company's operations are dominated by the two heads of Groupon's Beijing and Shanghai offices, respectively Mads Faurholt and Raphael Strauch.

Reportedly, the joint venture's senior management is also composed almost entirely of foreign nationals and foreign-born Chinese, and, as a result, has a poor understanding of the Chinese market, claim sources. One job applicant said that the senior management "speaks very little Chinese."

Keywords: Oliver Samwer CityDeal Ouyang Yun Mads Faurholt Raphael Strauch Internet strategy Tencent HR JV 0700.HK Groupon e-commerce group buying Gaopeng

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