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Can Groupon crack the China puzzle?

February 23, 2011: 4:06 PM ET

The leading daily deals site has everything going for it domestically, but that means nothing when it comes to avoiding the scrap heap other high-flying U.S. Internet companies have been tossed onto in China.

When Groupon China finally, officially, goes live, again, it will have some 1,700 local "tuangou" sites to compete with. Yes, if anything sums up the hurdles Groupon is facing in China, it's that the language of the country it's trying to take by storm already has a single, specific word to describe its business model.

According to Chinese sources, Gaopeng.com, Groupon's local venture with Internet portal Tencent, went live for just 24 hours earlier this month before getting pulled down. Groupon's local staff supposedly jumped the gun, and Tencent "took emergency actions" to shut down the servers, a possible sign that two companies may be in a joint venture, but aren't exactly warm and fuzzy partners just yet.

"Shutting down the web site shows the desire by Tencent to control this venture," wrote the Southern Metropolis, a local Chinese newspaper. "Tencent is sending Groupon a little warning: 'on Chinese turf, you listen to me.'" More

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