Way forward, with help of history

Updated: 2012-04-20 07:55

By Lin Jing and Su Zhou (China Daily)

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Way forward, with help of history

Renren says the mobile Internet sector is the next big thing for social networking services

Even though Renren Inc CEO Joseph Chen doesn't see himself as China's version of Facebook CEO Mark Zuckerberg, their companies are very similar. Renren.com, which was once named Xiaonei.com (meaning "on campus"), shares Facebook's classic blue-and-white framework and both targeted university students in the beginning.

Even their business strategies are very much alike. In an effort to expand its mobile Internet traffic, Facebook recently bought Instagram, a company that developed a photography app for mobile devices, for $1 billion (760 million euros).

Renren Inc, the leading social networking service (SNS) in China, is also sparing no efforts in the mobile Internet sector as increasingly more users are moving from personal computers to mobile devices.

"Mobile Internet will be the next growth point of SNS and we plan to invest at least $30 million to $60 million each year in the coming three years," says Chen, who is also the chairman of Renren.

There were 513 million Internet users last year in China, data from China Internet Network Information Center shows. Among them, 73.4 percent were accessing the Internet through personal computers and 69.3 percent through mobile phones.

Cai Fang, an analyst with iResearch, an Internet research firm, says that with the popularity of smart phones, the number of mobile Internet users will exceed that of personal computer users by 2016.

Chen says mobile Internet access is convenient for SNS users and SNS will be the natural winner on that platform, which makes this year the year of investments for mobile Internet projects.

Renren has already launched apps for all mobile platforms, including iOS and Android systems, and Renren HD recently became the first SNS app in the Windows store for Microsoft devices.

By the end of last year, Renren.com had 147 million active users, an increase of 34 percent from 2010. Among them, more than 38 percent of them log in via mobile devices on a monthly basis, and more than 60 percent of mobile users via smart phones.

Renren.com expects that by the end of this year it will have about 200 million users and more than 50 percent of them will visit Renren.com by mobile devices.

Even though it is experiencing a smooth growth in users and traffic, the business isn't financially rewarding.

Last year Renren lost about $20 million to $30 million in its mobile business, because, Chen says, mobile advertising is less mature and isn't as profitable as online advertising. But Chen expects the loss to be only a temporary setback.

"This is a game of Internet giants such as Apple and Google and small companies needing to invest large amounts of money before it can gain profits."

Chen says that though the mobile Internet is still in its infancy, the great potential cannot be ignored. Chen insists that Renren will mitigate the loss by exploring new users and new revenue models and says he believes that Renren will be the first group to profit from the mobile Internet.

Chen is generally prudent, but can sometimes adventurous, which also reflects his management and investment styles.

As an experienced investor in the Internet industry, or "an old guerrilla", as he calls himself, Chen has a patient attitude about the market.

Cautious decisions in company operations and investments are a result of Chen picturing the worst possible outcomes.

Chen attributes this to his special interest in history. Apart from being a CEO of a New York Stock Exchange-listed company, he is also a voracious reader and good storyteller.

He regards reading as the most convenient way to learn about company management. When commenting on the changes of Internet industry, Chen cites the Punic Wars (264-146 BC), which he can relate to today's Internet companies in China.

"During the three wars, Hannibal of Carthage once beat the Roman Republic, but Rome took 17 years to fight Carthage. In China's Internet industry, competition is just like war, you will not know the outcome until the last minute," Chen says.

He applies this strategy to the current Internet industry. "Every Internet company is like a country at war," says Chen. "We all try to expand our territory and look for better weapons to beat each other."

The company's major competitors all have their own unique strategies. Sina Weibo, China's answer to Twitter, boasts of having renowned scholars and celebrities as users. Tencent, an amalgamation of social networks, e-commerce and online games, is proud of its diversified user base from different tiers of cities all over the country.

But Chen is pretty confident that Renren can survive and distinguish itself from others.

"All these existing companies have their own strengths, which make them hard to be conquered. For Renren, real name SNS is the core strength that we should stick with."

Real name SNS allows users to interact with their acquaintances in real life on a website. Different from weibo, real name SNS users know each other's real identity and are more comfortable sharing personal information.

Though users are required to provide their true identities when registering for micro blog accounts, many do not know each other. Chen explains that users don't share too much personal information on micro blogs because strangers can access them.

Targeted mainly at well-educated users mainly within the ages of 16 to 29, Renren positions itself as "helping users to manage their social networking efficiently".

"There are two things that I am certain of: more Internet users will have higher education, and their time will be more valuable as their incomes increase," Chen says. "Renren's core value is to satisfy their (users') needs for social networking with only 20 to 30 minutes a day. The more we can provide, the more market value we will have," Chen says.

In Chen's opinion, real name SNS is the castle that the company will try its best to protect. Meanwhile, the company is also looking for new business models to win the Internet war.

In the fourth quarter of 2011, Renren earned $50.9 million by selling its stock in eLong, an online travel company on the mainland. Chen says the amount of cash can support Renren's core business while it continues to build other platforms.

Renren has invested and launched many new businesses, such as the mobile location-based service, light-blogging website zhan.renren.com, Pinterest-like website j.renren.com, group buying website nuomi.com and online video sharing site 56.com.

"We will not let go of any new opportunities in this industry, because you cannot tell which one will be a gold mine."

Contact the writers at linjingcd@chinadaily.com.cn and suzhou@chinadaily.com.cn