RenRen Setting the Standard for China’s Social Networks

Facebook has set the standard for social networking outside of the great firewall, but a different set of rules apply inside of it. In China, RenRen is way ahead of its competitors, with 160 million registered users. It’s biggest competitor, Tencent’s Qzone, claims more registered users, but relies more upon usernames than true names and is slow to change.

RenRen is racing ahead and setting the standards for user interaction and monetization on Chinese social networks. Their model draws on both a healthy dose of Facebook copying and the unique characteristics of Chinese internet users, which can make it hard to grasp for social media observers outside of China.

How Mature is RenRen?

One of RenRen's TV ads told a story of a friendship restored after years of misunderstanding. And it was all possible 'because of RenRen.'

RenRen Social Ads Value Model

RenRen's Social Ads Value Model trumpets the 'derivative value' of SNS advertisin

In November, RenRen held a series of promotional events, called the The RenRen Effect, in Shanghai and Beijing to introduce its Social Ads Value Model in China. RenRen is attempting to define the value of social ads, and why it’s necessary for companies to get involved (in RenRen, of course). The model attaches value to different kinds of interactions between users, especially the second-order benefits of friends sharing to friends.

Facebook refers to this as “Derivative Value.” In The Facebook Effect (p. 261), David Kirkpatrick writes,

Once an advertiser establishes some sort of connection with a user it gets a tremendous amount of what Facebook calls ‘derivative value.’ Executives say that once a brand makes a connection witha consumer that leads to an average of about 200 free additional ‘impressions’–occasions when people on Facebook see information about that brand. ‘We will never again sell banner ads,’ says [Facebook advertiser], ‘Engagement ads leverage the power of the Internet to enable the marketer to have a dialogue with the audience. That’s very different from traditional banner ads on the Web. Those do what advertisers have done on TV and in print for fifty years–intentionally disrupt the experience you are having.’

With its “RenRen Effect,” RenRen is trying to introduce this concept of ‘derivative value’ to Chinese brands and advertisers. RenRen’s statement also highlights the multiplier effects gained via referrals from trusted friends. Alvin Chiang, Chief Marketing Officer of Oak Pacific Interactive, states:

With The RenRen Effect, advertisers don’t only get return on their initial investment in ‘Paid Media by impressions and clicks’ they get much more, on Social networks, advertiser also gets free ‘Earned Media’ through news feeds, a built-in mechanism which allows users to not only interact with a brand, but to share the brand’s own messages with their friends automatically and therefore, become brand advocates. In addition, the brand may eventually accumulate and gain ‘Owned Media’ through Fan Pages, another powerful marketing tool available on Renren.

Is RenRen’s pitch to be believed? We can’t really say, since it’s just the beginning of the social ads era. But one thing is certain, there’s a limit in terms of user experience–sooner or later users will become saturated and can’t take anymore ads. But RenRen is confident that they are still long way from that point. Right now RenRen is more like a theme park with fancy rides (ads) as attraction, though the ad-centric strategy may not be fitting for long term development of the site.

What is RenRen’s Advantage?

Facebook always experiments with its design, bringing out new functions and then testing user feedback. It’s definitely more technologically advanced than RenRen.

Since creation, RenRen has not had many turning points in its technical development. Most steps follow Facebook closely, so we can’t see if there’s a sense of creativity in RenRen. When Facebook launched Places, Like, and Pages, so did RenRen (with exactly same names). They are very efficient at copying Facebook on the major functions, but there are the lesser details of Facebook that’s still desirable in RenRen, such as the more intelligent newsfeed system and an updated user interface (RenRen’s today is Facebook’s yesterday). So what is RenRen’s strategy that attracted 60 million users in one year?

1. Existing Users

Many RenRen users came from the time of XiaoNei, campus buddies that have established strong ties in RenRen over the last two to four years. These users have stored a huge amount of content in RenRen, so there’s a high barrier for them to switch, even when they leave school. New work connections have to join RenRen to be part of their social network.

2. Campus Network Environment

Even though none of the officials in OPI will admit that RenRen is still a campus network, when it comes to student users, especially the younger high school students, RenRen is still their primary choice of SNS, because based on the maturity level of SNS sites in China this is what they are most comfortable with.

3. Decline of Competitors

In 2010, we have seen huge declines in SNS sites such as Kaixin001 and 51. Their lack of development has cost them large numbers of users. As users abandon their sinking ships, RenRen beckons.

RenRen’s Game Plan & Reliability

The 5 Major Trends of SNS development as defined by RenRen

The RenRen management views the future of SNS in five steps: Mobile, Entertainments, Social Structure Horizontal Shift, eCommerce, and Cross Platform Integration.