Groupon and Baidu: the new rivals in China

One's a lowly Chicago startup, the other is king of search in China; who can control group buying?

After spurning one of the most talked-about M&A deals of the year that never was, Groupon is looking forward to the future of its business, by simultaneously digging its heels in its Chicago roots and preparing for broad international expansion, especially in Asia and the Middle East.

Because of the startup’s astronomical valuation in the rejected Google $6 billion acquisition deal, many people often forget that Groupon is just that--a startup. To be fair, the group buying site has already penetrated 300 markets in 35 countries. But, like any smart startup, Groupon still sees plenty of room to grow.

"We'll continue to expand geographically and on the subscriber front," Rob Solomon, Groupon President and COO of Groupon, told Ad Age on Wednesday. "What you'll find is our international business in the very near future will likely be larger than our North American business in terms of revenue."

Solomon specifically named China, Korea and India as future targets in Asia.

The revelation from Groupon’s top executive is particularly striking when considered in light of the two-week-old launch of https://tuan.youa.com, a new group buying site operated by Chinese search leader Baidu.  

Launched in beta at the month’s start, Youa Tuangou (which means “group buy” in Chinese) features special deals on its main site, just like Groupon. Additionally, businesses can promote their own discounts through the site, without having to wait to be specially featured, by posting deals on Baidu Shenbian, a Yelp-like customer reviews site part of Baidu’s extensive Web properties.

"Any merchant on Shenbian can set up a group shopping deal. We give them the tools," said company spokesman Kaiser Kuo. "This is going to be a very important feature for us on Youa."

Groupon hasn't just been sitting idly by while Baidu gets serious about online deals. At around the same time Baidu launched its new site, Groupon acquired three companies--uBuyiBuy, Beeconomic and Atlaspost--to help expand its group buying offerings in Singapore, Taiwan and elsewhere in Asia. Now the startup just needs a strategy for entering China and other Asian markets.

In the first half of 2010, the big news in Chinese technology was Google’s gradual exit from the search market there, a decision spurred by the Mountain View, Calif. company’s detection of hacking efforts originating in Chinese government computers directed at activists in the U.S. Google reneged on its promise to filter search results to the liking of the Chinese government, the Chinese government refused to put up with any such rebellion and, long story short, Baidu won majority control of the search market in China.

Now, with Google out of the search market in China and (temporarily) out of the group buying market anywhere, it looks like the big story in 2011 will be the competition between Groupon and Baidu. Rather, 2011 will be about Groupon trying to claim and cement its name globally as the leading name in group buying.

But with all the knockoffs from startups and established companies, including Baidu and Google (don’t be surprised when they launch their own group buying service), Groupon has a big job on its hands.