Renren.com (人人网) filed F-1 for IPO to the U.S SEC on April 15, the first major step in the road to an IPO on the New York Stock Exchange as “RENN”. So how will Renren fare?
Renren is China’s largest real-name social network, created by Wang Xing back in late (December) 2005. It was initially a clone of Facebook called Xiaonei (校内), with college students as the main users just as Facebook was before opening to all.
Wang Xing and his team sold Xiaonei to Oak Pacific Interactive (OPI) for somewhere between $2 and $4 million. The IPO targets a valuation of approximately $4.3 billion, so I’d imagine Wang Xing probably has a few regrets. The Japanese firm Softbank, in turn, holds a 35% stake in OPI. In August 2009, Xiaonei launched a new domain and changed it’s whole branding to Renren, in an effort to expand beyond campus. For an overview of Renren, including the data from its F-1 filing, see: Renren Inc. in 25 Slides.
Inside Renren’s Stats
In December 2008, December 2009 and December 2010, the number of our monthly unique log-in users was approximately 17 million, 22 million and 24 million, respectively. In March 2011, we had approximately 31 million monthly unique log-in users. (Renren Inc. F-1)
That’s significantly lower than data from CNNIC and iResearch, which claims 87 million and 95 million monthly active users, respectively. The CNNIC and iResearch data, used by Renren in business development presentations, has a different definition of “active” or is simply inaccurate.
At the end of 2010 iResearch had Renren at 95 million active users, while Renren itself reports 24 million, nearly a 4x difference. Clearly, our earlier TechRice adage applies: “there are lies, damned lies, and Chinese statistics.”
The following are extracts from reports Renren provided us, that shed more light on the Renren’s competitive position:
Top left: At the end of 2010, Renren held 36% market share in real-name China SNS (excludes Qzone), leading its next closest competitor, Tencent Pengyou by 13.5%, and far ahead of Kaixin001.
Top right: Renren also claims the highest user loyalty, meaning 70% of users are unlikely to shut down their Renren accounts to join another SNS service.
Bottom: Future user usage frequency, 60% of users stated that they will spend same of time in Renren as they are now, 15.9% vote they will spend more time, 20.2% vote for less time, and 3.7% unsure.
Revenue: Social Ads
In 2008, 2009 and 2010, online advertising accounted for 49.2%, 39.4% and 41.8%, respectively, of our total net revenues. Consequently, our profitability and prospects depend on the continuous development of the online advertising industry and advertisers’ allocation of an increasing portion of their budgets to social networking websites in China. (Renren Inc. F-1)
Renren is without exaggeration the most profitable social network in China, specializing in social advertisements. Renren provides customized social ads for big brands through fan pages, mini-sites, flash banner ads, and embedded ads in social games. Here’s an example of Renren’s social ad campaign for UNIQLO.
Part of Renren’s advantage is that its user income levels are considerably higher than the general internet population in China.
Challenges for Renren Ahead
Renren still faces fierce competition in SNS [see overview of China's top 15 social networks] and product development challenges on its road ahead.
1) Chinese Super Microblogs
Microblogging is not a theoretical danger to SNS in China, but rather already so serious a threat that SNS sites are “dying” due to the rapid expansion of microblogs. Since Sina Weibo’s launch back in late 2009 both Sina and Tencent have reached 100 million registered users. Weibo is not only gaining users, but more importantly controlling time spent online as consumers are constantly updating their Weibo and digesting other user-generated contents.
And Chinese search giant Baidu, the Google of China, recently announced that they are revamping Baidu Talk, their earlier social networking product, into Baidu Weibo.
2) Tencent & Zynga Cooperation, New Competition in Social Gaming
The F-1 filing mentions that social gaming is a core business for Renren. Now Tencent is rumored to have a deal with Zynga to import CityVille to China, one of the top ranked social games on Facebook. From initial reactions, this seems to be a move against Kaixin001′s Happy City. But, looking at the bigger picture, it’s much more of a significant threat to Renren’s Game Center.
3) Product Development Challenges
Renren in F-1 identified itself as the standard-setter of social networking user experience:
Our market leadership stems from our track record of innovation and our pioneering role in China’s social networking service industry. We believe many features and functions that we introduced to the China market have improved the quality of our user experience and have subsequently become standard throughout the industry.
Yet Renren has continuously been outperformed by Chinese microblogs in some of the key features that are revolutionary to online behavior in China. For example, microblogs allow users to watch embedded multi-media contents on the same web page while Renren still redirects the user to a separate page for viewing. Lately Renren has, like Facebook, even adopted the “@” mention function popular on microblogs.
To be more direct, an investment manager from Innovation Works in Zhihu wrote:
Renren lacks understanding to grasp users’ real needs, which they haven’t solved yet. [link]
Renren is largely a clone of Facebook that has not reached the technological complexity of Zuckerberg’s original. Renren’s profitability is impressive, but all SNS are also constantly challenged to provide a higher quality user experience. In China, that improvement is currently being accelerated primarily by Sina Weibo.
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