Renren Inc records loss because of high costs

Updated: 2013-03-12 11:20

By Yu Wei in New York (China Daily)

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Renren Inc, regarded by many as China's Facebook, said it lost money during the fourth quarter, and analysts said high costs mean it will take time for the Beijing-based social networking company to return to profitability.

The company, whose American depositary shares trade on the New York Stock Exchange, said on Monday that it posted a net loss of $21.1 million, or 6 cents per ADR, for the three months ended Dec 31. That contrasts with the $44.3 million, or 11 cents per ADR, in net profit that Renren recorded for the same period in 2011.

Net revenue for the most recent quarter was $48.8 million, a 49 percent increase from the year-earlier period.

"2012 was a year of investment and transition for Renren," Chairman and CEO Joseph Chen said in a statement.

The company started in 2005 in a manner similar to Facebook Inc - as a social media service mainly among college students - and now also operates Renren mobile, daily-deals site Nuomi, online gaming service and the video-sharing website An IPO in May 2011 brought Renren ADRs to the NYSE, but the company has struggled to make a profit due to high operating costs.

Renren's Class A ADRs fell 4 cents to close at $3.03 on Monday.

According to the company, daily users on increased 21 percent year-on-year to about 178 million at the end of 2012.

Although Renren is seen as an imitator of Facebook, the companies' business models are starkly different. Facebook makes money mainly from Internet advertising while more than a half of Renren's revenue is from online games - $90.2 million last year, more than double the figure for 2011.

On an adjusted basis to exclude stock-based compensation, amortization and impairment of intangible assets, Renren's loss was $16.7 million. Adjusted net income for the year-earlier period was $48.2 million.

Echo He, an analyst at Maxim Group LLC, a New York brokerage, said that considering its persistently high operating costs, it will take some time for Renren to be profitable again.