Social networking sites (SNS) in China grew at a much slower rate in 2009 than in 2008, according to Analysys International, a technology market research firm.
According to their latest statistics, SNS sites saw a 68.3-percent increase in registered users to 176 million, while the industry took in 776.6 million yuan (US$114.68 million), up 55.9 percent.
The increases are markedly lower than figures for 2008. In that year, the number of users jumped 138.4 percent and the market increased by 344.6 percent.
Growth is expected to be even lower this year. Analysys International estimates that social networking sites in China will see only 22.7 percent more new users and a 40.4-percent increase in the social networking industry market.
Chen Yizhou, CEO of Oak Pacific Interactive, a leading operator of SNS sites in China, said that his company's websites have seen no increase in the number of users this year. Business volume also dropped for the first time in July.
Many social networking sites are now faced with challenges on retaining users and making profits.
Two such sites, 360quan and Mayi.com, surprised many in the industry when they shut down in July.
More and more SNS sites attract users by cooperating with game companies to introduce social games. But the average lifespan of a social game is one to three months, with users switching games often.
Many websites attract a lot of users within a short period of time but then face problems of user loyalty after users become bored of the games, according to Analysys International.
Moreover, the game industry has seen its own downturn this year in China, with slower growth rates as well, making it more difficult for SNS sites to make a profit off them. Without a reliable user base, SNS sites have difficulty finding advertisers, whom most websites rely on for profits.
The most fundamental thing is to provide excellent social game products, said Wang Jinqiang, vice director of 51.com's marketing department.
But many social networking sites are beginning to explore new avenues to profit.
Some websites have introduced e-commerce on their sites. As e-commerce in China is growing quickly, it has the potential to bring more profits compared with social games. But many of them are still working on how to integrate their sites effectively with e-commerce.
Industry analysts have also suggested that SNS sites start charging user fees, making a profit through paid services. Social networking companies need to devote more energy to developing paid services to make a profit, one analyst from Analysys International said.
Social networking sites also have potential to make profits through hosting mobile sites, which attract more users. Companies have yet to find a way to generate revenue through them, though advertisements are an option.
