A tangled Web of social networking

The battle between two major Chinese social networking sites, Renren.com and Kaixin001.com, will soon spread to the US stock market. That’s because the two companies are planning IPOs in the United States in the coming months.

On April 15, Renren submitted its application for an IPO on the New York Stock Exchange. With a price tag of $9 to $11 a share, its market value is estimated to be about $3.95 billion. Chinese media reported that Renren’s rival, Kaixin001, is also planning to list in the US in the coming months.

The companies have been involved a lawsuit for two years in a dispute over a domain name.

However, on April 11, just days before Renren submitted its listing application, a Chinese court found Renren’s parent, the Beijing-based online entertainment company Oak Pacific Interactive Corp, guilty of unfair competition and of violating Kaixin001’s legal rights.

Kaixin001 announced on Tuesday that it has appealed the judicial review to the Supreme People’s Court. It aims to force a public apology from Renren and receive compensation of 10 million yuan ($1.53 million) instead of the 400,000 yuan awarded by the court.

Oak Pacific Interactive told China Daily that it has not yet received notification of the verdict from the Supreme People’s Court and said that the dispute with Kaixin001 is “not serious”.

The companies, which currently focus only on the Chinese market, plan to list even before Facebook, the global giant in the social-networking sector. According to industry experts, the dilemma for investors lies in the fact that the companies are almost indistinguishable with respect to their business models and target demographic.

“The US capital market is extremely interested in the growing Internet market in China, especially companies that share the same business models as their international peers,” said Feng Po, an analyst at ChinaVenture Investment Consulting Group.

Renren.com was founded in late 2005 under the name Xiaonei.com, which means “inside the campus” in Chinese. Incorporating popular social networking features, Xiaonei.com spread to nearly every Chinese university and college. The website was acquired by Oak Pacific Interactive 12 months later and was renamed Renren.com.

Following the rebranding, Oak Pacific created another social networking site under the domain name “Kaixin.com”, and used a layout similar to their competitor, Kaixin001. Kaixin.com later merged with Renren in November 2010. According to Kaixin001, the merger gave Renren an additional 30 million users.

Renren currently has around 160 million registered users and advertising revenue totaling 1 billion yuan. Kaixin001 has 120 million registered users but the company has not disclosed its sales revenue.

By Tuo Yannan (China Daily)



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