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Summary:

When is an explosion in mobile users ever a bad thing? When those users are switching from your website and you have no mobile business model. That is what growing numbers of online service are now worrying about.

Angry man yelling in to mobile phone
photo: Shutterstock / Lisa F. Young

Facebook is not the only online service whose business model is threatened by its own growing mobile success. Renren, the Chinese social network often compared with Mark Zuckerberg’s site, just reported exactly the same risk.

“Brand advertising remained challenging, due to macro conditions, increased competition and the continued migration of our user traffic from PC to mobile,” CEO Joseph Chen said whilst announcing Q2 results.

Renren, which is listed in New York and is China’s top real-name social network service, reported quarterly ad revenue fell by more than a tenth compared with last year, to just $15.1 million – despite total active user numbers growing by almost a third to 162 million.

“Looking ahead, our strategy remains focused on mobile opportunities, with increasing effort to experiment different monetization models, including mobile gaming, mobile advertising and mobile commerce,” Chen pledged.

Observers should not focus solely on the advertising component. Renren has joined fellow Chinese digital media services in reporting a worsening national economy as well as a slow-down in the country’s broadband adoption.

Against that backdrop, however, mobile adoption – which is still surging – may pose a risk.

Facebook’s stock market IPO filings warned investors that its growing popularity on smartphones, especially in emerging markets, risked its business because it does not have a fully-fledged mobile business model.

Renren’s Q2 gross profit grew 13.9 percent to $27.9 million thanks to its online game revenue growing 122 percent to $22.5 million.

  1. Hi Robert. Well-written article about RenRen’s poor transition to mobile. My issue lies with your quick jump to label RenRen as “China’s Facebook”. RenRen aspires to be as ubiquitous and monetized as FB, but a closer look will show that it is in fact a different platform that should be labeled as “China’s Facebook”, as well as “China’s Twitter” and “China’s Tumblr”. Sina Weibo, who recently partnered with search-giant Baidu, can claim that title. Where RenRen (though listed somewhat admirably in New York) falls short in terms of mobile transition and advertising viability, Sina Weibo picks up the slack. One of the major shortcomings of our western analysis of the Chinese social landscape has been our too-quick inclination to label Chinese social platforms as “The Chinese Facebook” or “The Chinese Twitter”. In reality, the landscape is much more diverse and complex than this westernized view allows, and should be treated as such.

    Thanks,

    Ben

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