Korea’s internet rumour mill has been working overtime in the past day or so, as reports surfaced that Living Social, the world’s second-biggest social commerce site, was lining up a takeover bid for Ticket Monster (T-Mon), the market leader in Korea.
According to reports from E-Today, news that Barclay’s Bank was facilitating a takeover of T-Mon led one stock trading firm to value the company at 300 billion won, or around US$280 million. This would make the 50 percent holding of Daniel Shin, the company’s CEO and biggest shareholder, worth around US$140 million.
Ticket Monster has admitted to contacting both Living Social and Groupon, but says it was only doing so to try and attract investment. Rumours of a takeover, the company added, are “groundless.”
E-Today says that while the vehemence of T-Mon’s denials mean this story may have been no more than misguided speculation, the fact it arose at all (and for the market leader) indicates deeper problems at the heart of social commerce in Korea. Many local social commerce companies, the story says, are motivated by little more than a desire to get bought up by bigger competitors, and overspend wildly on marketing and quick expansion to achieve this.
In addition, the story says, a business model that relies solely on taking 20-30 percent commissions is always going to be vulnerable.
With social commerce companies requiring just a homepage and a few staff to set up, the entry barriers in Korea are very low. This, E-Today says, has led to an explosion of small- and mid-sized social commerce companies, along with “cannibalisation” among the top four, who compete ferociously over the same vendors to offer their daily deals.
Said one “insider”:
The fact this rumour arose at all is a reflection of how tough things are for social commerce companies. There’s an acute need for a satisfactory long-term business model that can remedy the problems of the the ‘commission profit’ sales structure.
UPDATE: For anyone who cares, I corrected some translation errors I made on the first draft, which were pointed out to me by the unfailingly helpful @sunlars