Naspers loses Twangoo deal

South African media and internet powerhouse Naspers lost out to US online group-buying company Groupon in the race to purchase local e-commerce start-up Twangoo, its founder and CEO Daniel Gausco says.

Speaking after the announcement of the deal earlier this week, Gausco says that, while Naspers and Groupon had made similar offers in terms of cash and conditions, it was the US company that made it clear that it wanted to buy Twangoo.

"Both went through the standard rounds of due diligence and negotiations, but Groupon was the one that really wanted to buy us," he says.

Groupon's purchase of Twangoo was one of three such transactions the US company concluded in the past month. The other two are Indian daily deal site SoSata and Israeli company Grouper.

The three companies bought by Groupon have all been in existence for little more than a year and all were established with the aim of using social media to drum up business for companies by marketing discounts on various deals and items by gathering large numbers of consumers.

"Our business was a little different from those because we targeted the higher LSM (living standards measure) categories - in other words, those people who have ready access to credit cards and look for good deals at top restaurants and such places. We tell establishments that we can bring a certain number of clientele in exchange for a substantial discount of about 50%," Gausco says.

The concept of bulk purchase power for consumers has been around for a long time. However, the idea of using social media, e-mail and such forms of internet marketing is still relatively new in South Africa and the rest of the African continent.

"Groupon definitely wants to obtain entry into emerging markets such as Africa. In fact, the purchase was not so much about the technology we had developed but about Groupon wanting an operational and marketing presence," Gausco says.

The deal reinforces the technology entrepreneurs' dream of creating a business and then having it bought out by a large player soon after its inception. Twangoo was in business for less than a year before negotiations started between it and Naspers and Groupon.

"We realised early on that we needed either strong financing or the backing of a big player to make this work and we approached them," Gausco says.

Because Groupon is a privately owned company, it does not disclose the value and the terms of its deals. However, Gausco acknowledged that one of the stipulations is that he and certain employees have to continue working at the company for a minimum of three years.

Chicago-based Groupon caused a stir of its own last year when it rejected a $5.6-billion offer by internet search engine giant Google, and then raised almost $1-billion from various investors to build a war chest that has helped finance its overseas purchases. - I-Net Bridge