Renren (NYSE:RENN) has recently sold the online video streaming service of 56.com to Sohu. One year ago Joseph Chen, Renren CEO, was rumoured to be looking to sell 56.com, the rest of its group-buy service Nuomi, and Renren.com altogether. (The remainder of Nuomi would be sold to Baidu several months later).
None of these businesses have performed well. Renren.com, the Facebook clone, never managed to expand its user base beyond college students. The social network began to see decreases in monthly unique users in the second quarter of 2013. The display advertising revenues from a limited user base were not significant.
Neither the acquired video streaming service nor the homegrown group-buy site drove significant growth in user base or top-line revenue for Renren. They were in fact cost burdens.
Gaming was the only business that ever generated profits for Renren, but begun declining from late 2013.
The company never generated an operating profit after the quarter when it was listed on the New York Stock Exchange.
Renren successfully sold the idea of “Facebook of China” to Western investors, raising US$743 million in an IPO and hitting a market cap of US$5.5 billion in May 2011. Its stock price would drop by 80% within a year. Now its stock is trading at a US$1.2 billion market cap (with over US$800 million in cash and term deposits as of Q2 2014), about one fifth of its IPO level.
Renren was rebranded from Xiaonei.com (“on campus” in Chinese), a pixel-to-pixel Facebook clone launched in December 2005 and acquired by Joseph Chen’s company in October 2006. As Renren means everyone in Chinese, the purpose of rebranding was to broaden its user demographic, though this wasn’t successful.
Xiaonei was founded by Wang Xing, current CEO and founder of China’s leading group-buy service Meituan, and his core team. Wang and his team decided to sell Xiaonei was because they failed to raise much needed funding. Many people believe Renren wouldn’t be where it is today if Wang had not sold it, thinking Wang a superior product manager to Joseph Chen.
Chen was behind a Xiaonei competitor before acquiring it. At the time there were a handful of social network services in China including Mr. Chen’s 5Q.com, though Xiaonei was more popular than its peers. Before 5Q, Chen was CEO and co-founder of Chinaren, a social service for students, though it became hard to use after being acquired by Sohu.
Some Renren users would continue to post photos of their weddings or babies after college graduation, but found they were losing audience. Apart from keeping in touch with college schoolmates, very few features kept users logging-in.
Over the past several years Renren has essentilly cloned almost all hot online business ideas: a Tumblr-like blog, professional networking (Jingwei.com), video streaming, music streaming, group-buying, etc. Few have been well-designed or developed, and none have gained traction. Once Sina Weibo became the dominant social service in China in 2010 and 2011, Renren had no hope.
Joseph Chen is now better known as a famous investor. His investments in Chinese tech companies such as eLong and VIPshops have seen good returns. Recently his company led investments in Chinese financial social media Xueqiu.com and US crowdfunding site Fundrise. To Chen, Renren may be just an investment through which he (and his venture capital backer Softbank) had gained hugely through the IPO.