A paradox seems a foot when a Chinese social network pilots an innovative global initiative at the same time its stock price is plummeting. As Renren, China's Facebook teams up with China Merchants Bank to create a co-branded credit card with "social features" - in one week's time, the value of its stock fell from US$14 to an all time low of US$6.78 as of closing on June16.
Renren, Inc (RENN) operates a social networking platform in China that similar to Facebook enables users to connect and communicate with each other. While only a fifth the size of its US counterpart, Renren has 122 million "activated users" in China, where 18.5 million average daily unique users post 14.1 million status updates a day and 4.7 million photos a day.
Renren is China’s largest real-name social network, created by Wang Xing back in late 2005. It was initially a clone of Facebook called Xiaonei, with college students as the main users just as Facebook was at its inception.
While the current performance in the stock market is less than stellar, China Merchants Bank believes in Renren's future and has put their money where their mouth is by launching a "globally innovative pilot" that combines social, location and mobile services.
According to a PR Newswire, the credit card program will offer information about, and services provided by over 10,000 of their merchant partners through Renren's location-based services. This will allow co-branded credit card holders to "check in" from their current locations to receive promotional offerings and loyalty incentives found in locations closest to them.
Joseph ChenThe CEO of Renren, Joseph Chen described this partnership as an important step for the social network and one that will distinguish them from the pack. Even Facebook has not engaged with financial institutions in such a fashion.
So with innovative campaigns such as this one, why is Renren faltering on the stock market? With Deutsche Bank behind the IPO according to financial analyst Andy Yeung, he believes that Renren will be successful over the long haul. "Its long-term strategy to create an integrated platform for [social networking], web gaming, and social commerce should enable RENN to further monetize its large and growing user base."
He adds that "while the valuations of RENN and other Chinese [tech] stocks have contracted recently as the market adjusts to the prospects of slower economic growth and greater macro uncertainties, we are bullish on RENN's long term growth prospects, given strong underlying fundamentals."
Renren is also very strong when it comes to monetization. Dissimilar to Facebook, brand campaigns are sold to companies at high prices. According to Kai Lukoff in a Mashable article posted before Renren's IPO, he noted that while Fan Pages are free on Facebook, big brands have been known to pay as much as 600,000 yuan (about US$90K) for similar advertising on Renren. In essence, Renren's Fan Pages are like mini-sites, such as this example from Nike.
Nike Fan Page on Renren
So as Facebook's IPO is set for Q1 of 2012 at an extraordinary $100 billion, I am sure Zuckerberg is watching Renren's new features with one eye, while determining where they are falling short in the markets with the other. As the graphic novel satire, "Facebucks & Dumb F*cks" points out, China, more than any other player in the social media space is the social network giant's major competition. And it's important for the FB CEO to learn from their strengths - and more importantly their weaknesses - so he knows how to vanquish them in the near future.
Page from Facebucks & Dumb F*cks graphic novel
UPDATE: June 30: Renren is bouncing back from it's $6.78 low.