NUOMI.COM and Dianping.com, two leading Chinese group buying websites, are seeking new ways to attract a wider range of customers in a sector crowded with online competitors.

Online group buying, which offers customers discounts if enough of them sign up for a certain deal, is a hot sector in the world's largest Internet market. Nuomi and Dianping are trying to position themselves at the forefront of online trends to hawk bargain deals for restaurant coupons, film tickets and products ranging from clothing to cars.

Last month, Nuomi.com, a group buying affiliate of Renren Inc, China's leading social networking site, sealed an agreement with Focus Media that will allow it to advertise on Focus's network of 165,000 flat-panel display screens in office buildings in 95 Chinese cities.

Focus Media's display network will be upgraded to enable mobile phone users to view group buying deals from vendors in the vicinity of the office buildings.

Users will be able to use near field communication technology to receive and download links of these deals or discount information to their mobile phones and complete payment on their handsets.

Nasdaq-listed Focus Media said earlier it plans to invest up to 500 million yuan (US$77.2 million) to upgrade its display networks for a new interactive advertising model.

At the same time, Nuomi said it plans to expand its mobile services to its 122 million active users. Whenever they check in, they will be able to view group buying deals that are several blocks away from the office building or in nearby commercial zones.

The location-based applications on smartphones is designed to determine users' geographical positions and will also assist users in finding nearby shops, cash machines, schools and hospitals they are seeking.

"The group buying business and location-based services can be combined very easily and attract a wider user base," said Shen Boyang, general manager of Nuomi.com.

The website said earlier this year it will spend 200 million yuan on marketing to raise its brand awareness.

It has also teamed up with Elong, China's second largest online travel company, to offer hotel coupons and restaurant discounts of as much as 70 percent.

About 30 percent of Renren user visits come from smartphones and tablet PCs.

"Combining the group buying business with our existing social networking site will introduce more potential customers to Nuomi and help them grow business at a faster pace," said Joe Chen, chairman and chief executive officer of Renren Inc.

"Socialized e-commerce will have huge growth potential in the next 10 years."

Although Nuomi appears to be ahead of its rivals in forging new commercial channels, its finances suggest that the website has a long way to go. Nuomi reported operational costs of US$4.6 million in the first quarter, compared with only US$900,000 of revenue. It currently accounts for 4.4 percent of Renren revenue.

"Judging from Nuomi's situation, it doesn't seem possible for most group buying sites to make profit in the short term because of their heavy spending on market promotion," said Wu Xuefei, analyst at China E-commerce Research Center.

"Besides, most of them take only 10 to 15 percent commission for every deal sold, compared with an average 50 percent commission rate for overseas counterparts," she commented.

Among China's group buying sites, Nuomi has a conversion rate of 7.6 percent - the highest in that sector, according to Internet consultant iResearch Inc. The conversion rate is the proportion of visitors who actually buy something.

Part of that success lies with Nuomi's high quality vendors, iResearch said.

But some think it may take a while for Nuomi's strategy to work as the company needs time to raise user awareness.

"Nuomi's wireless strategy and its alliance with Focus Media is still a framework and it may take a long time to realize their ideas as technology for near field communication is not very mature yet," said Hu Longfei, analyst at iChinastock.com, a website that covers Chinese companies listed in the United States.

China's group buying market recorded transaction volume of 1.7 billion yuan in the past year, with a surge occurring at around August and September as the number of group buying sites saw an average 30 percent monthly rise, according to research house Analysys International.

In the competitive, fast-changing world of group buying, today's market leaders can easily turn into tomorrow's laggards.

Among those nipping at Nuomi's heels is Shanghai-based Dianping.com, which entered the group buying market last year. Dianping had previously confined its business to collecting user reviews and recommendations for restaurants, shopping and entertainment venues, providing discount coupons for website visitors.

Market watchers note that Dianping's diversification into group buying fits nicely with its experience in restaurants, hotels, coffee shops, chain stores and entertainment venues.

Dianping also sees its future in the mobile Internet realm. Smartphones with easy connection to the Internet allow users to carry with them all the information they may want on outings, whether shopping, meeting friends for coffee or planning weekend events.

Users of Apple's iOS, Google's Android and Nokia's Symbian can now browse and search for information and coupons supplied by Dianping. The company also has upgraded its application on the iPhone to allow users to pay for their group buying purchases with their handsets.

"We have seen commuters eager to check out popular group buying deals on their way to work." said Tammy Chen, a marketing official with Dianping. "By introducing the group buying purchase function, they no longer have to sit at a desktop and complete their purchases."

The site has around 8 million mobile application users and the company estimates their numbers may grow as much as 10-fold this year. The site now has over 400 million page views per month.

In late April, Dianping received US$100 million from venture capitalists Sequoia Capital, Qiming Ventures, Trust Bridge Partners and Lightspeed Venture Partners. Revenue generated by its group buying business now comprises 40 percent of Dianping's income.

Chief Executive Officer Zhang Tao says competition is so fierce that weaker players are certain to fold. He estimates only two or three influential players will remain in the market next year.