Meet RenRen, The "Facebook Of China" That's Going Public At $4 Billion

joe chen renrenRenRen CEO Joe Chen

RenRen has just filed to go public at a $4.3 billion valuation.RenRen is “the Facebook of China”, having started out as a Facebook clone and being the biggest real name social network in China.

RenRen is owned by holding company Oak Pacific Interactive and is now much more than a social network, since it makes games and operates a group buying site.

We thought we’d take a look at what RenRen is like, its history and its future, and its threats. What happens to RenRen might be a guide to what happens to Facebook, Twitter and Groupon in the US.

Like Facebook, at the beginning Xiaonei was open only at elite Chinese universities, and grew like gangbusters.

In 2006, Oak Pacific Interactive buys Xiaonei for a few million dollars

The founders cashed out for a few million dollars and now the company is going public at $4 billion.

If only Xiaonei had had its own Sean Parker. A billion dollars is cooler than a million dollars.

In 2007, Xiaonei changes its brand to RenRen to expand beyond campuses

RenRen means 'people's web' as opposed to 'on campus' (Xiaonei); the change came with a huge advertising campaign.

The site is profitable from selling big brand ad campaigns

Unlike Facebook's dinky, self-serve ads, RenRen sells big, elaborate campaigns to big brands with mini-sites, fan pages and the like.

According to TechRice, 'Renren is without exaggeration the most profitable social network in China.' Having the most upscale demographic among Chinese social networks doesn't hurt.

Perhaps more importantly, RenRen now does games and group buying

RenRen has two subsidiaries, RenRen Games and Nuomi. RenRen Games makes Zynga-style social games, but is also a games portal of its own with more elaborate games. RenRen drives traffic to RenRen Games, which then monetizes it through virtual goods.

Nuomi is a Groupon-style group buying site. Again, RenRen drives huge traffic to it but it also exists as an independent service.

2010 revenue was ~$76 million, 58% from virtual groups and group buying, and the rest from brand ads

(Chart via iChinaStock)

RenRen's biggest investors are Softbank and General Atlantic; Alibaba Group is buying shares in the IPO

The Alibaba Group is the biggest e-commerce company in China. It's striking that they're buying shares in a social network in an IPO. It will be interesting to see whether a partnership develops, and how it works. It might foretell some of the developments of Facebook commerce in the West.

Here's the dark side: user numbers aren't that high and revenue is flattening

In its filing, RenRen reveals that it had 34 million active users in its last month, which is much lower than third-party estimates had said.

What's more, revenue, while strong, has been flattening for the past few quarters, which isn't what you'd expect for a company in such a fast-growing sector.

Microblogging is absolutely crazy in China, with the biggest Weibo growing like gangbusters, and most Twitter-like services growing increasingly elaborate. TechRice says Weibo might actually be RenRen's biggest threat as people move to microblogs. As commenter SMF points out, RenRen is growing by 2 million users a month -- and Weibo by 10 million users a month.

It will be interesting to see if this trend repeats itself in the US, where Twitter is having a harder time being really mainstream.

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