Megatrends: China as Rabbit, or Groupon’s Deal of the Day

Groupon has played a great game in the past two years. With an unbelievable investment of capital, a solid base of fans in every major city, and a team of incredibly driven people, they’ve expanded to over 40 countries and 250 cities.

On pace to reach $1 billion in sales faster than any company has yet done so, they don’t just want to make money — they want to set records. Recently, they turned down a $6 billion offer from Google (courageous for many, foolish for some) in hopes of a $15 billion valuation come time for IPO. All in all, Groupon’s recent entrance into the precarious Chinese market is the crowning example of nothing but their indefatigable spirit and determination.

It was courageous to enter an oversaturated market and to bring an entrepreneurial and decidedly American spirit into a country whose very culture is at odds. Most remarkably, though, was the aggressive and optimistic expansion undertaken in a country where no web-based foreign companies — Google, eBay, Yahoo and the like — can claim to have been successful.

Bringing this attitude to China is to be commended, but if capital and courage has proved infallible thus far, China provides a unique challenge. If young American companies succeed by being fast, fresh and fun, the Chinese are more cautious. It is not enough to just have lots of money and a tested business model. In fact, the business model is so successful that it’s already been copied innumerable times and an alliance to confront foreign intrusion is quickly forming among domestic competitors.

Whereas Groupon used speed to its advantage in the past, it does not have first dibs in China. It must rely more on cultural sensitivity, the cultivation of relationships, and market savvy in order to achieve its Chinese goals.

Sure, the Chinese market is both highly coveted and capricious, but one thing is certain: it’s commercide to mention Tibet. Last Sunday Groupon spent $9 million for three ad spaces during the Super Bowl, the last of which began as a PSA for Tibet and ended as a call to “help yourself” — with a half off deal for fish curry (who knew Tibetans ate fish?) at a Tibetan restaurant in Chicago. Because Groupon began as a philanthropic website for group action, it was a tongue-in-cheek ad that poked fun at the history of the company, but it inadvertently managed to upset just about everyone. Consequently, Groupon might have accidentally drowned their Chinese expansionary dreams with the dead weight of an expensive investment.

But in Groupon’s terms, perhaps they’ve only been set back a couple of yards. And who but the CCP should intervene as the least likely and most ironic savior? With over a thousand competitors at their heels, and none jumping on the opportunity to crush the aspiring market leader, suspicions are justified. The microfeeds on Chinese quasi-Twitter, Sina, might be going crazy with civilian threats against Groupon, but the Chinese quasi-YouTube, Youku, has removed every translation of the advertisement, and there are virtually no mentions of the incident on any blogs or newspapers. The CCP is keeping a lid on the incident, unwilling to provoke widespread and public outrage.

Why would the CCP be covering this up, anyways? U.S.-China relations have always been a top priority for the Middle Kingdom, and the last thing they want is for both countries to relapse into a debilitating/destabilizing clash of cultural and political values. Many events last year certainly asserted the authority of the CCP — the Chinese response to the Nobel Peace Prize provoked comparisons to the Nazi regime, for example — but they were tremendously damaging for U.S.-China relations.

This year, however, began with a new resolution. Hu Jintao’s recent visit to the United States was a success for international relations, and it is likely that the CCP wishes to sustain this renewed goodwill.

If Groupon had invoked the fury of the masses for any other issue, China would not have stepped in. But Tibet could provoke a nationalistic outrage in both countries, jeopardizing the fragile relationship between two key players in the global arena. China will do everything in its power to keep polarizing issues such as Tibet from entering the public sphere, even if it means inadvertently helping a foreign company. But Groupon still has to help itself. If it can keep its merger with Chinese quasi-Facebook, Tencent, Groupon might just have another chance at the Chinese market.

And if Groupon succeeds, it will truly be a victory of the American entrepreneurial spirit. It will be an even bigger victory for the CCP, having proved itself capable of not only encouraging, but also curbing nationalism. After the events of last year, skeptics question China’s responsibility as a rising superpower. But if last year was the Year of the (rebellious and unpredictable) Tiger, this year is the Year of the Rabbit, a zodiac sign that represents peace-making and diplomacy.

Is this the year of China as a confident international player? Has the Rabbit finally learned how to pace itself?

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