THE top social-networking service in the world s biggest Internet market was created by graduates of a prestigious university to help students communicate with each other. And it s not Facebook Inc.
Renren.com leads China s surging social-networking market with more than 160 million registered users, according to Analysys International in Beijing. Competitor Kaixin001.com has more than 93 million. Their edge over billionaire Mark Zuckerberg s service: Facebook is blocked in China.
Our service is basically the same as Facebook s, in terms of functions and features, said Donna Li, a general manager at Renren. We are more tailored to the China market.
With Facebook s valuation topping US$63 billion, Renren and peers may be the next investment opportunities in a market with more Internet users than the combined populations of the United States and Japan. Those sites and competitors Tencent Holdings Ltd. and Baidu Inc. have room to grow as the online advertising market is projected to triple to almost US$13 billion by 2014.
Advertisers have really warmed to the new social-networking sites very quickly, said Steven Chang, chief executive officer for China at Zenith Optimedia, the media unit of Publicis Groupe SA. A lot of advertisers are willing to do business with the new social-media sites because many of them actually use the services.
Renren, or everyone in Chinese, was probably preparing for an initial public offering, said Michael Clendenin, managing director at consultants RedTech Advisers in Shanghai. The site s biggest investor is Japan s Softbank Corp. Kaixin001.com, founded by former Sina Corp. executive Cheng Binghao, was also seeking a listing, Clendenin said.
Online advertising in China likely totaled US$3.9 billion last year and could climb more than 30 percent annually to US$12.9 billion by 2014, Susquehanna International Group LLP estimated in December. The portion spent on social networking would likely double to 24 percent that year from 12 percent in 2010, according to the Pennsylvania-based firm.
China s social-networking sites haven t competed against international Web sites since 2009, when access to Facebook and Twitter were banned. Internet users can circumvent the firewall through means such as AnchorFree Inc. s virtual private network service that assign an anonymous address traceable back only to the company and not the user. Using VPNs results in slower Internet connections.
Renren s roots trace back to 2005, when graduates of Qinghua University in Beijing founded Xiaonei.com, or inside school. That was just after Zuckerberg pitched his service to fellow Harvard University students.
In 2006, Xiaonei was acquired by closely held Oak Pacific Interactive Corp., which renamed the service Renren in 2009.
The name change was a great help for us, Li said. Previously, our name spoke of our background in academia. Now we have a wider appeal.
Advertising on Renren had more than doubled each year since the site started selling space in 2008, Li said.
Renren has a blue-and-white user interface and carries advertisements for Daimler AG s Mercedes Benz and China Mobile Communications Corp. s phone service. Renren users post messages via a dialogue box in the center of the page and access games, applications and other options on a menu on the left-hand side.
In 2008, Oak Pacific sold a 35 percent stake to investors including Softbank, the Japanese mobile-phone operator headed by billionaire Masayoshi Son, for US$430 million.
Renren aimed to increase user numbers through its music, wireless and location-tracking services, Li said. The Web site also aimed to boost sales through Nuomi.com, an online commerce affiliate.
Kaixin001.com, with a red-and-white interface, attracted users by focusing on browser-based online games, Chang said. Its most popular games include Happy Farm.
Kaixin001.com s core user base is white-collar workers, which is viewed favorably by advertisers, said Jim Tang, a telecommunications analyst at Shenyin Wanguo Securities Co. in Shanghai. Renren.com, because of its background in academia, is used mostly by students.
Their successes are noted by some of China s biggest Web companies. Tencent, China s largest Internet company by value, last year launched the social-networking site Pengyou.com to attract its QQ instant-messaging service users. The company says it had 636 million QQ accounts as of Sept. 30.
Pengyou, or friend, targets white-collar users, a company spokeswoman said in an e-mail.
The site would have trouble luring users from Kaixin and Sina s Weibo micro-blogging service, said Bill Bishop, an independent media consultant in Beijing.
Tencent is for the masses, he said. A lot of people who use Kaixin, Weibo, don t want to use a Tencent-sponsored social network.
Baidu, owner of China s dominant search engine, said this month it planned to develop more social-networking services.
Renren planned to take advantage of those restrictions on international rivals, Li said.
We don t know when Facebook will enter, and what they ll do, but we are confident, Li said. We want to be the dominant player in social networking.
(SD-Agencies)
