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China Telecom latest financial news from the Expert on Chinese High Tech Market, (former Journalist and Chief editor at Reuters : Mr Young )

LaShou: On the Cusp of Implosion? 拉手网或已面临生死抉择

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New developments are happening rapidly at group buying leader LaShou, which appears to be on the cusp of a meltdown as it runs out of money in the brutally competitive sector. As many of us prepare for the May 1 Labor Day holiday that marks the start of spring, many who follow this company may be wondering if LaShou will still be in business by summertime. In the latest development of this fast evolving story, domestic media are reporting a mass resignation of many top LaShou executives in recent days, including its top regional managers in Shanghai and Beijing, as well as a vice president. (Chinese article) That exodus would come only days after the company reportedly cut 40 percent of its technical staff in what looks like a desperate attempt to conserve cash. (previous post) These kinds of drastic cuts and resignations may indeed save cash, but if they continue there may not be any company left to operate. The rapid series of events seems to point to a company in crisis, which has  been building for more than a year as a natural clean-up takes place in China’s overcrowded and unruly group buying space. LaShou made headlines a year ago when the company, then just 1 year old, raised a cool $100 million from a group of investors hoping it would become the next Groupon (Nasdaq: GRPN), the US company that pioneered the group buying concept. (previous post) Back then it was saying it wouldn’t make an IPO for at least the next 1 to 2 years. But then investor sentiment abruptly cooled toward the sector as competition heated up, leaving LaShou and many of its peers short of cash after most expanded rapidly earlier in the year. LaShou tried to raise new funds through a New York IPO last fall, but had to indefinitely postpone the plan after the US securities regulator reportedly voiced concerns about its accounting. The company was reportedly trying to relaunch its IPO in the last few weeks; but we have yet to see any public filings and if these latest reports are true I seriously doubt anyone will want to invest even if it does file for an IPO. Clearly things are happening rapidly now, which means we will probably see LaShou either close or merge with a rival in the very near future — in what would be the biggest consolidation move to date in the group buying space. A number of companies have already merged or are on the brink of closure, so LaShou certainly wouldn’t be the first in this latest trend, though it would certainly be the most dramatic. If I were betting, I would predict the chances of a merger are better than 50 percent, with a profitable rival like Dianping or even a non-group buying company like Baidu (Nasdaq: BIDU) or Tencent (HKEx: 700) stepping in to acquire the company for a very low price. Then again, there is also the very real chance that LaShou could close, though I would put that chance at 30 percent or less. Either way, I would be surprised if this company is still in business as an independent group buying site by the time summer arrives.

Bottom line: A new exodus of top executives at LaShou reflects an accelerating cash crunch, with an an acquisition of the company the most likely outcome within the next 1-2 months.

Related postings 相关文章:

◙ IPO Chill Bites LaShou, China Auto 中资企业赴美上市连遭冷遇

◙ 55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速

◙ Investors Shun Struggling Groupon.cn, Yaodian100 投资者规避挣扎中的团宝网和耀点100

55Tuan + Ganji: Group Buying Clean-Up Acclerates 窝窝团携手赶集网：团购洗牌加速

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Just a day after writing about a rumored merger between 2 mid-sized group buying sites, we’re getting even bigger news that the long-awaited consolidation in the overcrowded space is accelerating with word that 55tuan, one of the industry’s top players, is taking over operation of the group-buying business of a major player called Ganji. (Chinese article) The first tie-up that I wrote about yesterday has Gaopeng, the joint venture of US group buying giant Groupon (Nasdaq: GRPN), reportedly in talks to merge with another mid-sized player called FTuan, in a deal that is probably being brokered by leading Internet firm Tencent (HKEx: 700), which is a shareholder in both companies. (previous post) This kind of consolidation, which will include both mergers and also a large number of closures, has been a long time coming, and 55tuan’s entry to the picture marks the first such M&A by one of the industry’s top 3 players. I predict we’ll see the industry’s other top 2 names, LaShou and Dianping, announce their own new tie-ups in the next 2-3 months, with LaShou likely to make the first announcement as it tries to create hype for its moribund New York IPO, which it originally filed for last year but later had to put on hold while it cleared up some accounting issues from the US securities regulator. (previous post) Let’s take a look at the latest news first, which has Ganji, a mid-tier group buying player, confirming it has formed a strategic partnership that will see it and 55tuan combine their group buying operations. Since 55tuan is clearly the bigger player and both companies are probably losing big money, I suspect this so-called “strategic agreement” will ultimately turn into an outright sale that will see 55tuan completely take over the Ganji group buying business for a modest fee of $100 million or less. 55tuan itself has said it wants to make its own overseas IPO, and reiterated as recently as last month that its listing plan is still on track for sometime later this year. (previous post) This tie-up with another mid-sized player like Ganji should help to generate some investor interest in 55tuan’s offering if and when it happens, and 55tuan is undoubtedly negotiating with other similar mid-sized players about more M&A even as it wraps up the Ganji deal. This new flurry of activity could be just the tonic the battered group buying space needs to generate some interest in this upcoming parade of planned IPOs, as investors will undoubtedly be excited at the prospect that the ultra-fierce competition that has gripped the market for the last year may soon come to an end and a handful of major companies with potential to be profitable will emerge. To that end, look for both more mergers and closures to come in the next few months, and perhaps for even some investor enthusiasm to emerge if and when 55tuan, LaShou, or another big group buying site manages to finally make a public offering.

Bottom line: The new merger between the group buying business of 55tuan and Ganji marks an acceleration of consolidation that could rekindle investor in the overheated space.

Related postings 相关文章:

◙ Gaopeng, FTuan Lead Group Buying M&A 高朋网和F团或引领中国团购业并购潮

◙ Groupon.cn Becomes 2012 First Group Buy Victim 团宝网员工被放假 中国团购业料将加速整合

◙ 55tuan Restarts IPO Race With LaShou 窝窝团和拉手网重启IPO争先赛

 

Dangdang Cuts Back in Latest Internet Distress Sign 当当网战略收缩

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I’ll close out the week with the latest trouble signs for China’s overheated Internet sector, where Dangdang (NYSE: DANG), the country’s lone major listed e-commerce company, is starting scale back some of its operations to save money. Media are reporting on the cutbacks as separate newly released data is showing just how badly bloated the sector became last year, when a flood of new money gushed in from investors buying into the hype of China’s Internet growth story. Let’s look at Dangdang first, as the company is showing all the signs of becoming the latest victim to feel the pinch of super-heated competition in the e-commerce space, where it competes with big names like 360Buy, also known as Jingdong Mall, as well as online retail sites invested and operated by other global giants like Wal-Mart (NYSE: WMT) and Amazon (Nasdaq: AMZN). The latest media reports quote Dangdang CEO Li Guoqing saying his company is initiating a “strategic pullback” in its geographic coverage, in a bid to lower its transport costs. (English article) Li added his company will put more focus in the future on its VIP customers, who obviously offer better returns than the mom-and-pop buyers in smaller cities that are far more expensive to serve. His comments come after Dangdang swung squarely into the red in its latest reporting quarter, posting a net loss of nearly $21 million after earning a $2 million profit in the year-ago period. (previous post) Hyper competition in the e-commerce space is partly the result of a massive influx of money last year that saw both domestic and foreign investors pump tens of billions of dollars into start-ups and larger companies like 360Buy, which made headlines last spring when it received more than $1 billion in new funds. New data just released by venture capital tracking firm Zero2IPO shows venture capital and private equity firms, who tend to focus on start-ups with smaller investments of $1-$10 million, pumped a record $5.8 billion into young Chinese firms last year, with Internet companies emerging as the clear favorites as 276 such companies received $3.3 billion in new funds — a 3.6-fold rise over the previous year. (English article) Those figures only reflect the smaller investments that Zero2IPO tracks, but other firms like group buying sites Dianping and 55tuan received much larger sums in the hundreds of millions of dollars, truly bloating the sector. One executive at Groupon.cn, another group buying site unrelated to US giant Groupon (Nasdaq: GRPN) summarized the current situation nicely in a recent interview, saying the investors who once fawned on all these Chinese Internet companies have suddenly lost their appetite to provide new funds due to concerns of a bubble, causing companies like his to make mass layoffs just to survive. Dangdang seems big enough to survive this bubble in the long term, but look for more short-term pain at Dangdang and just about everyone else in the e-commerce and group buying spaces for the rest of this year and possibly into 2013 until the bubble finally finishes bursting.

Bottom line: Dangdang’s business scaleback and new investment data from 2011 are the latest reflections of last year’s China Internet bubble, whose bursting is starting to accelerate.

Related postings 相关文章:

◙ China IPO Train Hits Bump With Vancl Resignation 中国上市事件撞上凡客诚品CFO辞职

◙  Mid-Sized Firms Suffer First In Internet Bubble Burst 中国互联网泡沫破裂

◙ Internet Investors Seek Refuge in Big Names 互联网投资者选择性支持中国市场领头羊

 

Group Buying Sites: The First to Fall? 团购网或将在互联网泡沫破灭时应声而倒？

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I’ve been writing for more than a month now about China’s looming Internet bubble, and a new domestic media report makes a good case that group buying sites may lead the way when this bubble bursts in the months ahead. (Chinese article) According to the report, China’s field of group buying sites has exploded in recent months, with some 5,000 such sites now operating versus just 2,000 at the end of last year. What’s more, an industry executive at one of the top sites, 55tuan, estimated that all of the top 10 players are now losing money, as they rapidly burn through hundreds of millions of dollars in cash raised earlier this year in pursuit of a very limited base of online Chinese shoppers. Those same consumers, with so many sites to choose from, are becoming more and more selective, forcing the sites to offer promotions that are ridiculously cheap and obviously money losing. Gaopeng, the group buying joint venture between global leader Groupon and leading Chinese Internet company Tencent (HKEx: 700), has captured headlines for much of the last month with reports of its steady layoff of hundreds of employees around China. In July, 55tuan, which earlier this year raised $200 million funding, also reportedly had to abandon plans for an overseas IPO after several major Western investment banks turned it down over concerns about accounting records for many of the companies it has acquired over the last year. (previous article) And to add to the mess, signs emerged last month that Chinese tax authorities were preparing to crack down on the unruly sector, which officials believe could owe more than 500 million yuan, or about $77 million, in unpaid taxes. (previous post)  With all these warning signs flashing, it’s not hard to imagine that the group buying sector is probably already in a state of crisis with a major shakeout likely to begin by the end of the year, which could easily see the closure of at least one or two big players.

Bottom line: The group buying sector, which has seen explosive growth over the last year, is the most likely candidate to lead the bursting of China’s current Internet bubble.

一个多月以来，我写了多篇关于中国互联网泡沫的文章，一家国内媒体的最新报导与我形成了呼应。这篇报导称，团购网可能在未来几个月互联网泡沫破裂时率先倒下。这篇报导称，国内团购网站2010年年底达到2000多家，到2011年7月，这个数字变成了5000家。此外，窝窝团高管估计，现在前十大团购网站全部亏损，这些团购网迅速烧掉了今年稍早筹集的数亿美元现金，争夺仍非常有限的中国网上购物者。这些购物者因为有那麽多网站可以选择，现在已经变得越来越挑剔，迫使网站提供价格便宜得很可笑的促销，明显是赔钱。全球最大团购网站Groupon和中国互联网公司腾讯合资组建的高朋网，在上月多数时间里都是媒体高度关注的对象，该网在中国持续裁员数百名。7月有报导称，窝窝网因遭到几家主要欧美国家投行的拒绝，放弃了赴海外上市的计划，投行为其去年收购的很多公司的会计记录感到担忧。窝窝网今年稍早刚筹资2亿美元。此外，上月有迹象表明中国税务机关准备对团购网行业严加管理，官方估计的欠税额为5亿元人民币，或相当于7700万美元。这些令人警醒的信号已经出现，不难想象团购网站行业可能已经陷入危机，年底时很可能开始发生重大变化，你可能轻易就能发现至少一两家行业龙头关门。

一句话：团购网去年经历了爆炸式增长，很可能在当前中国互联网泡沫破灭时应声而倒。

Related postings 相关文章:

◙ Tax Evasion Report: Trouble Brewing in Group Buying? 团购被曝逃税 行业整顿或在即

◙ Gaopeng, Kaixin Spotlight China Internet Turmoil 高朋网、开心网凸显中国互联网混乱现状

◙ 55tuan Scraps Listing Plan After Banks Get Cold Feet 各投行临阵退缩 “窝窝团”放弃赴美上市

Tax Evasion Report: Trouble Brewing in Group Buying? 团购被曝逃税 行业整顿或在即

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The unruly and ultra-competitive group buying space could soon add tax evasion to its growing list of woes, with a new report saying the turbulent sector may owe more than 500 million yuan, or $77 million, in unpaid taxes. (Chinese article) The report cites Analysys International, a fairly respected Internet research house, as the source of the report, but clearly this kind of figure came directly from tax officials or was derived using data they supplied, as there’s no way Analysys could get access to this kind of data from the companies themselves. As such, the report looks particularly worrisome for the already-turbulent sector, hinting at a pending crackdown by tax officials which could see the closure of many smaller players in a space which has seen explosive growth in the last two years. The sector already received a blow earlier this month when a leading player, 55tuan, was rebuffed in its search for a  Western investment bank to sponsor a planned New York IPO, after several banks it approached reportedly worried about the accounting of its numerous acquisitions over the last two years. (previous post) Gaopeng, the group buying joint venture between Tencent (HKEx: 700) and Groupon, has also been laying off hundreds of staff, leading many to question the company’s future. Three of the sector’s leading players, 55tuan, along with Lashou and Dianping, raised a collective $500 million combined earlier this year, as domestic and international investors clamored for a piece of a future Chinese Groupon. This latest wrinkle on the tax evasion front looks like a major clean-up could be coming soon, potentially hitting even some of the big players. Investors should watch for some interesting times ahead, as China’s overinflated Internet bubble looks set to burst in the not-too-distant future.

Bottom line: A new report on tax evasion by online group-buying sites is the latest sign that this unruly, ultra-competitive sector is due for a clean-up in the near future.

团购行业麻烦不断，或即将再添逃税一项。最新报导称，团购行业每年逃税或逾5亿元。媒体报导援引的是研究机构易观国际（Analysys International）的说法，但此类数据显然直接来自税务官员，或从他们提供的数据推测得出，因为易观国际无法从团购企业获得税务信息。所以，对于本来就很混乱的团购行业来说，这一报导尤其令人不安，预示着税务官员或将整顿团购行业，许多规模较小的团购企业或因此倒闭。过去两年，团购行业呈现爆发式增长。本月稍早窝窝团拟赴美上市，但其接触的各大投行均对其过去两年多起收购的会计问题表示担忧，因而拒绝为窝窝团融资。腾讯(0700.HK)和Groupon合资成立的高朋网也裁员数百人，令众人质疑该公司的未来。今年早些时候，由于国内外投资者希望在中国团购行业分得一杯羹，目前该领域的三大领先企业–窝窝团、拉手网和大众点评网共募集到5亿美元风险投资。这次团购逃税风波或预示行业整顿在即，甚至一些大型团购公司也可能受到冲击。投资者应关注这一前景，因为中国互联网泡沫似乎在不远的将来即将破灭。

一句话：有关团购网逃税的最新报导表明，这一混乱且竞争激烈的行业可能即将面临整顿。

Related postings 相关文章:

◙ Gaopeng, Kaixin Spotlight China Internet Turmoil 高朋网、开心网凸显中国互联网混乱现状

◙ Gaopeng Lay-Offs Auger Ad Spending Downturn 1高朋裁员预示网络广告支出或大幅下降

◙ Trouble Lurks in China Group Buying, as Gaopeng Drops Baidu 高朋停止百度的广告投放 团购行业初露窘相

Gaopeng, Kaixin Spotlight China Internet Turmoil 高朋网、开心网凸显中国互联网混乱现状

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Signs of turbulence continue in China’s cutthroat and overinflated Internet space, with worrisome news coming from Kaixin, China’s second biggest social networking site (SNS), as well as Gaopeng, the group buying site operated by Groupon and Tencent (HKEx: 700). First Gaopeng. Despite its denials that anything is amiss, Gaopeng has just laid off 400 employees across its various locations, in what looks like the biggest in a steady stream of cuts that have made headlines in the Chinese media in recent weeks. (Chinese article) The company is facing intense competition from at least three major rivals, Lashou, Dianping and 55tuan, which collectively raised $500 million in venture funding earlier this year (previous post) and are clearly engaging in a cutthroat grab for share in this market that is certainly lucrative but lacks the size to support so many major players. I suspect that Groupon started up Gaopeng early this year to give itself a “China story” to please US investors in the run-up to its upcoming IPO. But now that it sees how cutthroat the market is, it could easily shutter Gapeng before the offering in a bid to hide what are undoubtedly some ugly financials from investors from this struggling joint venture. Meantime, Kaixin, which lost a race earlier this year with Renren (NYSE: RENN) to become China’s first publicly listed SNS, has broken a months-long silence to address recent reports of massive subscriber losses. The company’s low-key founder Cheng Binghao held an unusual media briefing in which he said Kaixin’s previous explosive growth rate is slowing to a more realistic level, and added the days of heady growth for China’s Internet may be finished. (Chinese article) Cheng said the company now has 117 million registered users, just behind Renren’s 124 million, though I suspect many of those are inactive, which Cheng hinted is the case. With that kind of a slowing growth story and the current general market turbulence, along with the threat of a new SNS service from Sina (Nasdaq: SINA) (previous post), I wouldn’t look for Kaixin to move ahead with its IPO until it has a better story to tell, which would be next year at the earliest.

Bottom line: Downbeat reports surrounding Gaopeng and Kaixin reflect a China Internet market in turmoil, with consolidation and few new IPOs likely through the rest of the year.

中国互联网急剧扩张的混乱状况持续，开心网和高朋网接连传来令人担忧的消息。先是美国Groupon和腾讯联合在华经营的团购网站–高朋网。尽管公司否认运营出现状况，但高朋网在各地站点已裁员400人，似乎是逐步裁员规模最大的一次，近几周高朋网裁员成为中国媒体热门焦点。高朋网面临团购市场竞争加剧的局面，大的竞争对手至少包括三家：拉手网、大众点评网和窝窝团，上述三家公司今年早些时候共募集5亿美元风险投资，也正积极投入团购市场的激烈厮杀。团购市场利润确实可观，但规模不足以支持如此多的大型团购网站。我怀疑，Groupon今年稍早成立高朋网时，是想给自己创造一个“中国故事”，从而在其IPO筹备阶段取悦美国投资者。但鉴于中国团购市场竞争激烈的现状，Groupon或在IPO前轻而易举地关闭高朋网，避免投资者看到这一合资公司中难看的财报。今年早些时候，开心网在赴美上市赛跑中输给人人网(RENN.N)，未能成为第一家在美国上市的社交网站。开心网打破一个月来的沉默，回应近期有关开心网用户大量流失的报导。开心网低调的创始人程炳皓罕见举行媒体吹风会，称开心网爆发性增长期已经过去，增长放缓至一个更实际的水平，并称中国互联网强势增长的时代或已结束。程炳皓透露，开心网现有1.17亿注册用户，稍低于人人网的1.24亿人，但我怀疑，其中许多并非活跃用户，程炳皓的表态似乎暗示了这一点。鉴于开心网用户增长放缓，目前市场普遍混乱，再加上新浪(SINA.O)微博的威胁，我认为，除非开心网能有更好的故事，否则不会推进其IPO，估计最早也要到明年了。

一句话：有关高朋网和开心网的负面消息表明，中国互联网市场现状混乱，今年内或将进行调整，不太可能有新的IPO。

Related postings 相关文章:

◙ Sina, Tencent Pose Threat in SNS, E-Commerce 新浪腾讯攻城掠地

◙ Advertising Squeeze Continues, Slowdown Looms 广告支出初显放缓迹象

◙ Gaopeng Lay-Offs Auger Ad Spending Downturn 1高朋裁员预示网络广告支出或大幅下降

 

Trouble Lurks in China Group Buying, as Gaopeng Drops Baidu 高朋停止百度的广告投放 团购行业初露窘相

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Competition appears to be getting stiff in the Chinese group buying space, with word that Groupon-invested Gaopeng is dumping its paid search spend on both Baidu (Nasdaq: BIDU) and Google (Nasdaq: GOOG) because they have simply become two expensive. (English article) The reports cite unnamed sources, but if true, the news is significant because it marks the lightest sign of trouble in the vibrant group buying space. It could also be an early warning sign for Baidu, which is trying to squeeze more money out of its advertisers as growth in the new sign-ups for its advertising services slows. (previous post) Regular readers will recall that group buying sites were all the rage among venture capitalists earlier this year, with three sites, Dianping, 55Tuan and Lashou raising $500 million combined, as global leader Groupon also entered the China market by forming Gaopeng together with Tencent (HKEx: 700). 55Tuan became the first company to show signs of trouble when reports emerged earlier this week that at least 3 major investment banks were refusing to underwrite its planned IPO due to accounting concerns. (previous post) This latest report on Gaopeng would seem to reinforce that group buying is not quite as big in China yet as all the hype, with Gaopeng itself only generating a relatively modest 30 million yuan per month in revenue. I wouldn’t be surprised to see one or two of these group buying sites combine within the next year as competition remains intense. Meantime, Gaopeng’s dumping of Baidu could also be an early warning sign for China’s search leader, which could start to see similar defections as companies balk at paying Baidu’s higher ad rates. Baidu said earlier this week that spending from individual customers grew by more than 50 percent in the second quarter (previous post), and clearly some customers like Gaopeng are not happy with those big increases and are looking for more cost effective ways to advertise.

Bottom line: Gaopeng’s dropping of Baidu’s paid search services reflects both intense competition in the group buying space, and also a coming wave of defections by cost-conscious Baidu advertisers.

中国团购行业的竞购看似日益激烈，有传言称，Groupon投资的高朋网因费用太高已停止在百度<BIDU.O>和谷歌<GOOG.O>的广告投放。报导援引了匿名消息人士的说法，但若真有此事，这则消息可谓重磅，因这意味着中国如火如荼的团购行业初露窘相。这可能也是对百度的一个早期预警，百度正试图向其广告客户收取更高的费用，因其广告业务的新签订单步伐放缓。经常看我博客的读者应该还记得，团购网站今年早些时候可谓风行一时，大众点评网、窝窝团和拉手网三家网站共募得5亿美元风险资金，与此同时，美国团购网站Groupon携手腾讯<0700.HK>成立了高朋网，进军中国市场。窝窝团是首家显露困境的团购网站，本周早些时候有报导称，至少三家国际投行因担心会计问题而拒绝代理其上市业务。这则关於高朋网的最新报导似乎再次说明，团购在中国的发展并非像炒作的那般声势浩大，高朋网一个月的营收也仅有3,000万元。随着竞争的白热化，倘若未来一年内有一两家团购网站合并重组，我将不会感到意外。同时，高朋放弃在百度投放广告也为百度提了个醒儿，面对百度不断上涨的广告费用，很多公司犹豫不决，百度或将开始看到类似的“倒戈”会不断出现。百度本周早些时候表示，第二季度个人客户的广告费用增加逾50%，很明显，高朋网这样的一些客户对百度大幅增加广告费用的举动很不高兴，并正寻求性价比更高的途径进行广告宣传。

一句话：高朋网放弃在百度投放广告不仅反映出团购行业的激烈竞争，而且也说明百度或面临一波广告客户“倒戈”风潮。

Related postings 相关文章:

◙ 55tuan Scraps Listing Plan After Banks Get Cold Feet 各投行临阵退缩 “窝窝团”放弃赴美上市

◙ Baidu’s One-Dimensional Growth Story Continues 百度亮丽财报难掩前景不确定性

◙ China Groupon Wannabes in Fund-Raising Frenzy 中国团购网站掀起融资狂潮