Renren, the mainland’s Facebook, suddenly has a Myspace feel to it

Staff members take a nap in the recreation room at the head office of Renren Inc. in Beijing

Staff members take a nap in the recreation room at the head office of Renren Inc. in Beijing

Renren was touted the Facebook of China when it debuted in New York in 2011. Today it’s looking more like online flameout Myspace.
The stock has lost more than three quarters of its value since 2011 and will drop about 18 percent in the next 12 months to USD2.74, according to the average estimate of analysts surveyed by Bloomberg.
Renren is struggling to diversify its business and boost profit as sales slide in a country with 632 million Internet users. The company forecast in August a plunge of as much as 54 percent in third-quarter revenue to $19 million, the smallest amount since at least 2011. While Renren was one of China’s first social media websites, it has been eclipsed by rivals including Tencent’s WeChat and Weibo, backed by Alibaba, which have been faster to adapt to the rapidly changing social media industry.
“Renren was the first social media platform to go public and could expand and grow, but failed to do so,” Cyrus Mewawalla, a managing director at CM Research in London, said by phone on Oct. 21. “When a new messaging app like WeChat comes up, you have to come up with your own messaging app; when shopping goes mobile, you have to catch that trend. It’s not giving enough variety of services to keep customers there, and therefore the bigger ecosystems are going to eat its lunch.”
Like Renren, Myspace was once a hot Internet property. In 2005, two years after its foundation, Rupert Murdoch’s News Corp. bought the social media website for $580 million. In 2006, Myspace had 55 million visitors compared with Facebook’s 15 million, according to ComScore Inc. In 2008, its advertising revenue reached $605 million before dropping to a mere $47 million by 2011, according to eMarketer, a fraction of Facebook’s $3.2 billion at the time. The same year, Myspace was sold for $35 million.
Renren’s management team is addressing the erosion of its business model by pursuing a strategy that focuses on a younger audience in China, Chief Executive Officer Joseph Chen said in August.
The company posted its first quarterly profit in the three months ended June 30 after nine straight losses. On a conference call with investors, the company said it will diversify its offerings to include an online financial business which will provide loans to students, Renren’s core users.
Cynthia Liu, a spokeswoman for Beijing-based Renren, declined to comment on the analysts’ outlook on the stock and the company’s business model.
“They probably should sell the company,” Francis Gaskins, research director at financial media site Equities.com, said by phone Oct. 22.
When Renren went public in May 2011, Gaskins was one of those who had high expectations for the stock. At $14 a share, Renren was valued at 72 times annual sales, more than twice the multiple on Facebook at the time of its 2012 initial public offering. Its market capitalization has since then dropped by about $5.7 billion as the stock lost 76 percent.
For Amanda Dingyuan Hou, a Chinese freelance video producer in New York who switched from Myspace to Facebook and from Renren to Tencent’s WeChat, the change in social media preferences was a hunt for more useful services and more relevant content.
“When Renren appeared, students like me added as many friends as possible, but you get tired scrolling through horoscopes and advertisements searching for original content, because WeChat looked like a more enticing platform for posting news and reading comments,” Hou said by phone on Oct. 21. “It was the same with Myspace: you log in, you scroll through your newsfeed – to find out that all the interesting conversations are happening on Facebook.”
Three years after the IPO, the networking website’s valuation has fallen to less than eight times sales. The 24-year-old still checks her Renren account about three times a week, though for WeChat “it’s every hour,” she said.
Monthly unique users decreased to about 44 million as of June, Renren said in a statement in August. That compares with more than 438 million monthly active users for WeChat and 157 million users for Weibo, a Twitter-like microblogging service controlled by Sina Corp.
“Renren could try to turn around, but for that you would need strong management, a precise plan and financial resources,” Henry Guo, a San Francisco-based analyst at JG Capital, said by phone on Oct. 21. “I don’t know where it can get the money, and there are no strong management decisions in sight.” Elena Popina and Boris Korby  , Bloomberg

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