China's Facebook, Renren, faces stiff competition

Microblogging has become bigger in China than Facebook-like sites such as Renren, according to analysts

It's been called the Facebook of China. And to 24-year-old Kuang Yaqiong, it pretty much is.

Renren, a Chinese site, is the social networking platform Kuang uses everyday. It's user interface is similar to Facebook's and it allows her to keep in touch with her college classmates. Already, she has about 500 friends on the site.

"Young Chinese people like me can't take themselves away from Renren," said Kuang, who lives in the Chinese city of Xiamen.

The popularity of Renren is also starting to reach overseas. Renren is set to make its debut on the New York Stock Exchange (NYSE) on Wednesday and could potentially generate US$743 million in investments by listing.

But as Renren generates buzz among U.S. investors, analysts believe the site will face stiff competition in the Chinese market, where the social networking scene has only begun to take shape.

"Everyone wants to be a part of Facebook. So bankers are calling Renren the Chinese Facebook," said Bill Bishop, an independent analyst who watches the country's Internet market. "But it's not the only Facebook of China."

The country represents a major Internet market, with 457 million Web users, according to the China Internet Network Information Center. The actual Facebook, however, has been blocked by Chinese Internet censors for almost two years now. Authorities in the country strictly regulate content on the Web, and often ban overseas sites with politically sensitive content like Twitter and YouTube.

This has left China's social networking market ripe for local players. Renren, which means "everyone" in English, has risen to become the market leader. But in no way does it match the scale of Facebook, according to analysts.

While Facebook dominates in the U.S., Renren only holds about 25 percent of China's active user market for social networks, according to Beijing-based research firm Analysys International.

Renren also reports it has 31 million monthly unique users, less than a third of its total 117 million registered users. In contrast, Facebook has more than 500 million active users.

Renren was launched in 2005, originally as a way for college students to connect. By entering the market far earlier than its local competitors, Renren was able to amass a large following, said Dong Xu, an analyst with Analysys.

"But this took more than five years to achieve," she added. Meanwhile, other social networking sites have done the same, but in a shorter period of time.

One such site is Tencent's Pengyou, which officially launched this January and now has an 18.1 percent share of the social networking user market, according to Analysys. Tencent is one of China's largest Internet firms and operates the country's most popular instant messaging service QQ.

"Tencent's Pengyou can have a lot of influence in this market," she added. "This will put pressure on Renren."

However, analysts have said the future of social networking in China is being paved less by sites like Renren and more by Chinese Twitter-like services known as microblogs. As a result, the rise of such services has taken users away from Renren.

One of the most popular ones is operated by Sina, which also runs a top Internet portal site in the country. Sina reported in March that its microblog serviced had grown to over 100 million users, after only being in service for a year and a half.

Mark Natkin, managing director for Beijing-based Marbridge Consulting, said the big draw that Chinese microblogs have over Renren is that they allow users to connect with a vast audience, either through posting comments or searching for the hottest topics. Sites like Renren, on the other hand, are limited to which people a user befriends.

"When people are going to [microblog], they are going to see not just what the hot topics are in their friendship groups, but also in the entire country," Natkin said. "Also microblogging is increasingly incorporating more features from social networking sites," he added, noting that Chinese users can post pictures and videos on their posts.

But analysts expect Renren will become more of a player in the Chinese market after acquiring new funds after listing on the NYSE. They also point to how Renren is listing on the stock exchange while the rumors persist that Facebook is preparing to launch a site in China with the country's largest search engine Baidu.

"This IPO for Renren is going to get them a lot of cash," said Michael Clendenin, managing director for RedTech Advisors. "But the market is still very competitive and its still in its very early days."

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Tags business issuesRenrenInternet-based applications and servicesBaidu.comTencentSEC Filingssocial networkinginternetinvestmentsFacebook

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