Group Buying Website Crazy Survival Rule: Advertising War

From the "thousand regiment war" to a few "giant wars", China's group buying website took more than a year.

Sweet Fang Yiran (a pseudonym) has been pferred to the group for sale for a year.

This year, she felt completely "Crazy".

In September last year, Fang Yi Ran joined.

This is not surprising.

Independent

However, there are signs that the roaring competition will soon reach its peak and slide down.

"Group buying second camp, many websites have been tight capital chain, part of the A round.

Wang Xing, CEO of the US group, said: "the 6-9 month of this year will be a critical period. After that, there will be fewer than five group buying companies."

Wo Wo Group chairman and CEO Xu Maodong said: "by the end of this year, more than 90% group buying websites will be closed down."

"CEO will clearly list the list of first, second, third enterprises by the end of this year," said Wu Bo, a handshake net.

The Chinese group buying website has changed from the "dumbbell shaped" of several large group buying stations and large number of local stations to the "inverted Pyramid shape" of most markets only by several major websites.

Advertising war

Group buying companies once laughed at each other: "too much advertising is just helping the competitors to educate the market, rather than increasing their brand awareness."

"Group buying on hand, that's settled!" the subway, bus stop in Beijing, Shanghai and Guangzhou, all over the world is Ge You, the star who set up his index finger to earn money by hand.

Since the beginning of this year, group buying websites have been burning money to set up an advertising show that is dancing all over the sky.

In addition to handshake, high Peng net, full net, glutinous rice net and other group buying websites have stepped onto the stage of major outdoor advertisements.

"The marketing cost will be about 140 million yuan this year," said the US mission.

The full net uses the "eight digit" signature of the animated image spokesperson "Dora A dream", the company CEO Feng Xiaohai thinks, "this is not burning money, but smart marketing."

The industry generally also believes that Focus Media ushered in another "spring", to a large extent, benefited from the group buying advertising war.

Focus Media reported in the first quarter of 2011 that Focus Media's total net revenue in the first quarter was US $146 million 600 thousand and net profit was US $20 million 500 thousand.

In the forefront of the battle, Fang told reporters that advertising indeed led to sales.

"Before looking for business talk, the first time we need to first popularize group buying concept, see three or four times, do not necessarily talk about the list."

In the memory of Fang's memory, just a week after reaching the handshake net, a single list was not discussed.

But now it's no longer difficult to talk about business with customers. "Customers often ask, are you buying the group buying company?"

In April this year, the handshake net announced that it had won 110 million dollars in the C round of financing.

Since then, Wo Wo Group announced that it expects to raise $200 million, and the US group announced that it would finance up to $62 million, and several group buying websites announced huge sums of money.

It is said that the group buying company once sneers at each other: "too much advertising is just helping the competitors to educate the market, rather than increasing their brand awareness."

"The handle network has not been so imaginative in advertising."

In an interview with reporters in July 27th, Wu Bo said that many advertising positions were discussed before the Spring Festival this year. After the Spring Festival, advertising prices were increased, and handshaking saved about 30% of the cost.

Wang Xing also claimed: "the United States network is relatively rational, there is no chaos burning money."

These high-profile expansion group buying websites are now not proud of advertising campaigns, but have been pferred to a low-key strategy.

According to a press survey, starting from the middle of this year, these websites will gradually shift their marketing positions from the offline to the online.

Wu Bo told reporters: "in the future, more advertising will be put into group buying navigation, search engine and other online platforms."

Xu Maodong also said: "we will pay more attention to online advertising, more accurate and more effective, this year's advertising budget will only be tens of millions of dollars."

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Gross profit drop

Last year, in 11 and December, the gross profit of group buying website was 15%-18%. After this year, vicious competition led to a sharp decline in gross profit and even to 5%.

According to CNNIC statistics, as of the end of June 2011, the number of group buying users in China has reached 42 million 200 thousand, the utilization rate has increased from 4.1% to 8.7%, and the growth rate has reached 125%.

Obviously, this is a rapidly growing emerging market.

Compared with other innovative markets such as e-commerce, the start-up cost of group buying websites is low and capital is fast.

In China, the proportion of group buying websites and businesses is generally 1:9, that is, the group buying network takes 10% of the sales volume as commission.

As long as there is product sales, group buying website has income.

This is also the fundamental reason for the overnight "1000 regiment war".

But this is just a beautiful dream of group buying, but the reality is cruel.

A group buying company has counted an account for the journalist: Taking the expenses of sales, personnel, advertising and marketing disclosed by the leading group buying websites as an example, the monthly sales volume of a group buying company is 150 million yuan, the Commission is 10%, and the gross profit is 15 million yuan. In fact, from the vicious competition, the proportion of some commissions has even dropped to 5%.

The gross profit of the 15 million yuan is to pay the following expenses: 5000 personnel, at least 25 million yuan per month (with a cost of 5000 yuan per unit), 10 million yuan in advertising and market investment in a single month, 2 million yuan in operating costs such as rent.

In this way, a leading group buying website loses 22 million yuan a month.

"The current group buying website is definitely a loss, no doubt."

Xu Maodong told reporters.

But he also said: "as long as we increase revenue, we can effectively reverse losses."

The question is how to increase sales revenue, or further expand the amount of advertising, raise awareness, or further expand the category of "one day more single", so that more salesmen can tap cooperative businesses and provide consumers with more diverse choices.

But this has virtually increased the operating cost.

In fact, the vicious competition between group buying websites has been very serious, and the cost of group buying websites has risen sharply.

Earlier, more than 200 people in the East China region and more than 60 people in the Chongqing area have switched to Wo Wo Group. Recently, more than 100 American backbone companies, including Wang Yang, general manager of Shanghai general region, have also switched to Wo Wo Group, all of which are related to Wo Wo Group's attractive salary and options.

And Groupon has just entered China and has been able to extract competitors from two to three times the salary of the industry.

Group buying: a crazy rule of survival

"The vicious competition between group buying websites has greatly reduced the gross profit margin of the industry."

Wu Bo told reporters that some websites are clearly buying 10 yuan of goods or services, selling at a price of 8 yuan to expand sales in the form of losses.

"Last year in 11 and December, the gross profit of group buying website was 15%-18%. After this year, vicious competition led to a sharp decline in gross margin and even to 5%, which led to the death of a large number of group buying enterprises."

Xu Maodong sighed, "compared to the US group buying up to 35% of gross profit, the Chinese group buying market competition is too intense."

"In the past six months, the market cost has increased by 10 times, the number of employees has increased 10 times, the operating cost has increased 10 times, and the investment amount has increased 10 times."

Wang Huiwen, vice president of the US group network, even shouted at micro-blog. The group buying "bubble is almost as big as the ozone layer. This winter will come very soon, this winter will be very cold."

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Get away from a bad fight

According to the reporter, these group buying websites gradually get away from the fierce battle and get rid of blind fanaticism and enter meticulous operation.

Previously, the Survival Logic of Chinese group buying websites is: first, sales volume and market position. Whoever wins the lead will be able to get venture capital and continue to exert force to win the championship.

Last minute.

However, with the differentiation of strength and the decline of PE and stock market, the group buying website began to accelerate its demise.

"After all, there is a Matthew effect in the Internet field, and the strong Heng Qiang."

Insiders say that every group buying website is grinding and running fast, hoping to get the market first as soon as possible.

In April this year, AI rankings ranked from the three indicators of "average daily coverage", "monthly total number of visits", "visits to order conversion rate (average daily number)".

Because of different indicators, the order of arrangement is different.

But Taobao Juhuasuan, handshake, beauty corps, Wo Wo are recognized as the first camp.

According to the reporter, these group buying websites gradually get away from the fierce battle and get rid of blind fanaticism and enter meticulous operation.

Fang Yiran told reporters that in order to keep the interests of the three parties in line with the group buying websites, businesses and users, they must resolutely resist excessive low price strategy when they talk about cooperation, and avoid the phenomenon of service damage due to low prices.

Without exception, leading group buying websites are investing more in technology and data mining.

"The technology platform of this industry is underestimated by many people. The group buying website should build a system based on accumulating lots of consumption data and merchant data."

Wang Xing said: "although this stage can not be fully reflected, but not ready now will be relatively passive."

At the same time, these group buying websites are trying to add different SNS elements, including consumers' evaluation system for businesses.

According to the statistics of group 800, the group buying complaints in June decreased for the first time.

In June, 911 complaints were received in the 800 litigation area of the regiment, representing a decrease of 114 compared with May.

From last December to May this year, group buying complaints grew by an average of 34.5% per month.

Hu Chen, co-founder of the group 800, said: "this is the obvious information that the consumption environment tends to be optimized."

These leading group buying websites have also split up in the future development strategy.

Inspired by Taobao Juhuasuan, the group buying websites such as handles and glutinous rice groups began to explore the potential market space of physical group buying; Wo Wo Group insisted on the field of life service consumption, Xu Maodong insisted: "only the life service consumer class is the best way to meet the essence and characteristics of group buying."

As for local group buying websites and vertical group buying websites, the industry generally believes that the former is hopeless and the latter still has the opportunity.

Group buying websites that have been active in local markets are now struggling, or acquired or gradually faded out of the market.

Xu Maodong claimed that the excellent local stations in China were basically bought out by Wo Wo Group.

"Wo Wo Group has seen more than 300 local stations throughout the country, and finally acquired 20 outstanding local stations."

He said, the new local station wants to rebuild the scale, the threshold has been very high, very difficult.

For vertical stations, Hu Chen believes that the overall development momentum of the group buying industry is still encouraging. The large group buying website will accelerate the evolution of the group buying website and form several sparkling stars under the impetus of capital strength, but this radiation does not affect the independent development and profit margins of vertical group purchase stations with special resources.

At present, the development trend is better, such as jumei.com, where to travel group buying.

"In the second half of next year, the gross profit margin of group buying website is expected to return to around 20%."

Xu Maodong said.

By then, the most radical and crazy battle in the history of Chinese Internet is expected to disperse.