Renren May Spin off 56.com for Independent IPO

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As one of the pioneers of Chinese local video sites, 56.com used to be the most important chess piece Sequoia Capital placed in China’s video industry. However, capital market left 56.com fewer opportunities after Youku and Tudou got listed in December 2010 and August 2011 respectively. In this context, 56.com was sold to Renren for US$ 80 million in September 2011 to become the latter’s wholly owned subsidiary.

This $80 million acquisition was the first strategic acquisition after Renren’s IPO. Mr. Joseph Chen, chairman of Renren said the deal would make it easier for Renren users to upload and share videos. 56.com would remain independent operation. Zhou Juan, founder of 56.com, was appointed as the vice president of Renren and the general manager of 56.com, who continued to be in charge of the management and operation.

56.com homepage, featuring user produced clips

Social networking service is one of those major channels where videos got shared and went viral. In addition to search engine and aggregate site like hao123.com, social media now has become a key entrance for users to access to videos. Having said that, it’s hard to tell the Renren-56 tieup was a success or a failure as 56.com appeared to be out of public attention for a long while. Once a while, we heard of its execs made noises about monetization or shift in focus, however, folks like Youku-Tudou, Sohu Video or Tencent Video that splashed money on copyrighted TV drama and movies are the new darlings of both capital market and audience, who still checked out 56.com regularly for UGC clips?

That’s why people now are curious about the future of UGC video services.

Zhou Juan said that 56.com’s cost – consisted of bandwidth, copyright, employment and operation expenditures – doubled last year. It did pay off from the standpoint of user coverage as the benchmark hit 160 million per month, not so bad for a video site stocked with kitten licking themselves or doggie chasing own tails videos instead of sensational Chinese/American TV series.

Ms. Zhou revealed that they planned to speed up 56.com’s mobile efforts given that mobile traffic now accounts for a large portion of video sites. She also mentioned that the entity might be spun off from Renren for an independent IPO.