Chinese SNS 51.com is reportedly seeking to go public amid the IPO heat. 51 is the fourth largest SNS (market share: 10.1%) in China, next to Renren(#1, 25.1%) Kaixin(#2, 19.4%), and Pengyou(#3, 18.1%), a report by Beijing-based market research firm Analysys International shows.
“We’re Going Public in 2010”
Founded by Pang Dongsheng in 2005, 51.com is popular amongst 2nd-tier and 3rd tier cities. The site to date claims over 200 million users. Chinese online game vendor Juren invested US$ 51 million in 51.com for 25% shares. Afterwards both Juren CEO Shi Yuzhu and 51.com CEO Pang Dongsheng indicated that 51.com will get listed in 2010. And now it’s 2011.
Along with the seeking IPO rumour came the site’s newly revamp. As you can see from the picture below, 51.com now features three major functions including Games, 51 Profile and 51 Friends Hunting. It seems to industrial experts that the renovation means 51.com is sorting out its business for a potential listing.
51.com is focusing on social games business for this year, the 6 years old Chinese SNS is said to launch its own game platform some time.
According to a Nielsen research in 2008, 51.com was then the biggest social networking site in China, with Xiaonei(later changed into Renren and went IPO in early May this year) second to it. But since then, a series of missteps left the website in turmoil.
‘A Series of Unfortunate Steps’
Starting 2008, 51.com raised more than US$ 76 million from various venture capitals including Sequoia, SIG, Intel Capital and Redpoint Ventures. With large capital in hand and under pressure as investors expecting an IPO, 51.com was then on a hiring spree to lure large amounts of executives and managements from competitors such as Tencent, Baidu; and started expanding business into multi territories, some of which includes game and IM.
However, Tencent has an ‘insurmountable’ lead in IM markets, while game market is crowded with tough and brutal rivals which dedicated to game designing and developing for years, amongst those are big names such as Shanda, NetEase, Tencent, Perfect World and 9You. Although 51.com’s Game Unit which founded in 2009 was powered by over 100 headcounts hiring away from companies like Tencent and so on, misjudging the market had taken a heavy toll on 51.com
Back in 2008, browser-based games won over Chinese customers for its convenience and client-free features, late comers such as 9Wee made a mint. However, lavishly equipped 51 decided to develop client-based game, and according to a 51 executive, their social games also not that popular either, “as a platform with huge users, our game revenue is actually very bad.”
Blind expansion and vague strategy resulted in rising costs and unsuccessful forays, which eventually leads to contractions in headcounts, costs and offers. Lots of staffs left downhearted.
Good Timing for Exit?
You can’t jump to conclusions that whether it’s the misjudging of market and blind expansion or the greedy nature of capitalists send the promising (according to Nelsen’s research) SNS into dreariness. It has been silent for nearly 3 years, till the recent IPO heat.
According to some observers, the reason 51 is so eager to get listed is that investors want to exit. Although Chinese concepts stocks are still welcomed by Nasdaq, Chinese network companies flocking into Nasdaq has made capital market questioning the justification of so many unprofitable concept companies receiving too many interests. This could be the reason why a dozen of latest addition to Nadsaq have begun trading below IPO price, including Dangdang(ticker: DANG), Renren(RENN), 21Vianet(VNET), Jiayuan(DATE), Netqin(NQ), Mecox Lane(MCOX) and Taomi(TAOM).
For 51’s investors, exiting-now-or-never seems true story.
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