Five reasons to invest in the RenRen.com IPO

In what promises to be one of the most exciting IPOs of the year, China’s leading social networking site, RenRen.com, is planning an IPO in the U.S. Here are five reasons to consider investing in RenRen’s IPO.

In what promises to be one of the most exciting IPOs of the year, China’s leading social networking site, RenRen.com, is planning an IPO in the U.S. Here are five reasons to consider investing in RenRen’s IPO:

1) Reach. RenRen is China’s undisputed leader in social networking. A recent article on TechRice claimed the site has more than 160 million registered users. The site’s user base surged by more than 60 million people between October 2009 and October 2010. That’s good enough to rank RenRen as the 16th-most-visited site in China (per Alexa) and the 108th most-visited site in the world. The site’s closest competitors aren’t far behind, though. Kaixin001.com is ranked 19th in China, and 51.com, is ranked 43rd in China. Still, the visibility of a large IPO could help cement RenRen’s spot as a market leader.

2) The market size. At somewhere between 420 and 460 million, the size of China’s Internet population dwarfs even the entire population of the U.S. And those users are flocking to social-networking sites, which had 176 million users last year, up 68 percent from the year before, MarketWatch reports.

3) Innovation. RenRen.com started as a Facebook clone. It was such a blatant copy of Facebook that it even labeled itself a “A Mark Zuckerberg Production.” The site’s evolved into its own entity since its 2005 origins, although it still mirrors many of the same offerings on Facebook.com. RenRen, for example, unveiled RenRen Places (a check-in system that lets users broadcast where they are) around the same time that Facebook launched Facebook Places. The company also launched a RenRen Like button that can be embedded on Web site pages and RenRen Public Pages, which can be used by local businesses and organizations to promote events and offerings – both are features that were first launched on Facebook.

Still, there are signs that RenRen’s beginning to experiment and develop its own ideas from the ground up, and that could lead to significant new revenue streams. Most notably, RenRen has launched its own Groupon-style coupon system and a streaming radio service called Renren Aiting. The wide acceptance of virtual currencies in China also promises interesting revenue possibilities on RenRen as the company strengthens its applications platform and continues biting into the country’s large online gaming user base.

4) Surging revenues. While there isn’t any publicly available financial data on Renren yet, the company has said its advertising grew by “more than” 100 percent last year and in 2009, according to FT.com. Facebook.com, which is the second most-visited site in the world, reportedly had revenues of $1.2 billion over the first nine months of 2010.

5) Social media is just plain different in China. Cultural differences in media consumption in the U.S. and China could actually make RenRen.com more profitable than Facebook. Chinese surfers have long shown different consumption patterns in their browsing habits on the Web. “The usage of social media in China is off the charts relative to almost any country in the world,” Thomas Crampton, Asia-Pacific director of Ogilvy’s 360 Digital Influence, a social media marketing service, told HuffingtonPost. There’s actually a strong propensity there to follow and engage with brands and businesses on social networking sites. 87 percent of social networking users in China follow or “friend” brands. That makes interacting with companies the second-most popular activity on RenRen and other social networking sites, according to Ogilvy’s research. That’s the sort of engagement marketers dream about, and it could push RenRen into the green a lot faster than analysts might expect.

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