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Chinese Facebook clone seeks NY listing | Chinese Facebook clone seeks NY listing |
(about 1 hour later) | |
By Juliana Liu Business reporter, BBC News, Singapore | By Juliana Liu Business reporter, BBC News, Singapore |
When the Chinese Facebook clone Renren lists its shares on the New York Stock Exchange on Wednesday, middle-age traders are sure to resurrect their former athletic selves, shoving each other aside to buy a slice of the company. | When the Chinese Facebook clone Renren lists its shares on the New York Stock Exchange on Wednesday, middle-age traders are sure to resurrect their former athletic selves, shoving each other aside to buy a slice of the company. |
Investors say Renren is likely to be another blockbuster listing, possibly matching that of Youku. | Investors say Renren is likely to be another blockbuster listing, possibly matching that of Youku. |
Previously, shares in China's Youtube tripled, in the best opening for a US listing in five years. | Previously, shares in China's Youtube tripled, in the best opening for a US listing in five years. |
"No doubt, the hype around Renren's IPO will propel its stock to dizzying heights in the early days of trading," says Michael Clendenin, managing director of RedTech Advisors. | "No doubt, the hype around Renren's IPO will propel its stock to dizzying heights in the early days of trading," says Michael Clendenin, managing director of RedTech Advisors. |
"But the post-IPO hangover will see volatility as investors wonder if this is really the 'next Baidu' or just one of a handful of struggling Facebook copycats." | "But the post-IPO hangover will see volatility as investors wonder if this is really the 'next Baidu' or just one of a handful of struggling Facebook copycats." |
Renren, like Youku, is not making money at the time of listing. | Renren, like Youku, is not making money at the time of listing. |
But its business model holds the promise of massive future profits in the world's biggest internet market because of the number of RenRen users. | But its business model holds the promise of massive future profits in the world's biggest internet market because of the number of RenRen users. |
Renren is banking on that premise, as well as on its singular status as the only pure-play social networking site open to mainstream investors. | Renren is banking on that premise, as well as on its singular status as the only pure-play social networking site open to mainstream investors. |
China's Facebook | |
It is known as China's Facebook because of obvious similarities between the two. | It is known as China's Facebook because of obvious similarities between the two. |
Facebook itself is banned from China for censorship reasons. | Facebook itself is banned from China for censorship reasons. |
Renren was started in 2005 by three classmates who initially targeted university students, before it was purchased by the current chief executive, Joseph Chen. | Renren was started in 2005 by three classmates who initially targeted university students, before it was purchased by the current chief executive, Joseph Chen. |
The site eventually widened its base to appeal to all internet users in China - hence its name, which means "everyone". | The site eventually widened its base to appeal to all internet users in China - hence its name, which means "everyone". |
Like Facebook, Renren makes money from internet advertising, but almost half of its income comes from online games. | Like Facebook, Renren makes money from internet advertising, but almost half of its income comes from online games. |
The company is offering its shares between $12 and $14 each. That represents a 30% increase from just a week ago, when it became clear that demand exceeded supply. | The company is offering its shares between $12 and $14 each. That represents a 30% increase from just a week ago, when it became clear that demand exceeded supply. |
The social networking site was able to increase its listing price range. | The social networking site was able to increase its listing price range. |
This was after it told investors that it had only 31 million active users every month, much less than the 117 million that it had stated initially. | This was after it told investors that it had only 31 million active users every month, much less than the 117 million that it had stated initially. |
First to list | First to list |
Mark Natkin, founder of Marbridge Consulting, says few investors would tolerate this kind of behaviour from a non-Chinese internet company. | Mark Natkin, founder of Marbridge Consulting, says few investors would tolerate this kind of behaviour from a non-Chinese internet company. |
"There aren't a lot of companies that could get away with that," he says. | "There aren't a lot of companies that could get away with that," he says. |
But he adds: "The appetite for Renren shares is there because this is the first major social networking site from anywhere to list." | But he adds: "The appetite for Renren shares is there because this is the first major social networking site from anywhere to list." |
The embarrassing revision of user numbers is only one reason why analysts in Beijing, where Renren is based, are sceptical about Renren's long-term future. | The embarrassing revision of user numbers is only one reason why analysts in Beijing, where Renren is based, are sceptical about Renren's long-term future. |
Sabrina Dong, an analyst at Analysys International, believes the pace of new users joining Renren is slowing every month. | Sabrina Dong, an analyst at Analysys International, believes the pace of new users joining Renren is slowing every month. |
"Of course its overall user base continues to grow, but if you look carefully you can see that the pace of acquisition is clearly falling," she says. | "Of course its overall user base continues to grow, but if you look carefully you can see that the pace of acquisition is clearly falling," she says. |
According to figures supplied by Renren, the company added an average of 29% more active users in 2009 compared to the year before. | According to figures supplied by Renren, the company added an average of 29% more active users in 2009 compared to the year before. |
But that figure fell to 18% in 2010, and remained at 19% in the first three months of this year because of greater competition from other social netwok applications. | But that figure fell to 18% in 2010, and remained at 19% in the first three months of this year because of greater competition from other social netwok applications. |
Rise of microblogs | Rise of microblogs |
Renren may be known to the West as China's Facebook, but in fact it is just one of many social networking sites on the Chinese mainland. | Renren may be known to the West as China's Facebook, but in fact it is just one of many social networking sites on the Chinese mainland. |
There is Kaixin001, due to list later in 2011, as well as internet heavyweights such as like Tencent, Sina and potentially even search engine Baidu. | There is Kaixin001, due to list later in 2011, as well as internet heavyweights such as like Tencent, Sina and potentially even search engine Baidu. |
And Mr Clendenin believes the explosive rise of microblogs modelled on Twitter are stealing users from the likes of Renren. | And Mr Clendenin believes the explosive rise of microblogs modelled on Twitter are stealing users from the likes of Renren. |
"China's microblogs combine the functions of Twitter and Facebook, offering a one-stop shopping opportunity," he says. | "China's microblogs combine the functions of Twitter and Facebook, offering a one-stop shopping opportunity," he says. |
He says it took Renren five years to attract 120 million users, whereas Sina's microblog, called Weibo, did the same in less than two years. | He says it took Renren five years to attract 120 million users, whereas Sina's microblog, called Weibo, did the same in less than two years. |
Weibo amassed about 37 million users in the first three months of the year alone. | Weibo amassed about 37 million users in the first three months of the year alone. |
But US investors are unlikely to be considering Renren's rivals when they pile into the listing on Wednesday. | But US investors are unlikely to be considering Renren's rivals when they pile into the listing on Wednesday. |
They are more like to consider much bigger numbers. | They are more like to consider much bigger numbers. |
China has an internet population of almost half a billion, and half of them use social media. | China has an internet population of almost half a billion, and half of them use social media. |
With global favourite Facebook out of the running, investors believe homegrown talent will find fertile ground. | With global favourite Facebook out of the running, investors believe homegrown talent will find fertile ground. |