Renren 2014 Review: Mobile Monetization, Downsizing In Focus

Renren (NYSE: RENN) has had a disappointing 2014. The company continued to face challenges in monetizing its mobile services, which led to widening operating losses over the last three quarters. This in turn led to a strategy of focusing its efforts on its core social networking services. Accordingly, it has sold off certain other divisions. In this article we focus on the performance of the Chinese social networking company in 2014.

We have a price estimate of about $3.50 for Renren, which is more than 30% higher than the current market price.

See our complete analysis of Renren here

Mobile Monetization Proving Challenging

Renren has had difficultly sufficiently monetizing its mobile platform, for several possible reasons. It has been suggested that the company moved to the mobile ecosystem too late, which could have cost it the first mover advantage it enjoys in the PC environment. ^[1] Further, the company’s management has admitted that Renren’s registration process for mobile phones is complicated. This is because Renren is a real-name network and seeks to verify users’ real identities. Some mobile users who do not want to register or use their real names have migrated from Renren to its competitors. As a consequence, some competitors have been growing their user bases faster than Renren (See Our Coverage Of Q3 Earnings). Additionally, advertisers are not showing much of an interest in Renren’s mobile app. ^[2]

Restructuring, Mainly Sell-Offs And Shutdowns

One major move on the restructuring front was the sale of the company’s video sharing site 56.com, which came unexpectedly in the third quarter. The reason for a sale, despite the site’s rising traffic, could be the crackdown by the Chinese Government on social media companies for spreading anti-social and anti-national ideas. The Government has identified five media to be censored rigorously: micro-blogging websites, online storage, video streaming, smart TVs and video terminals. While the future impact of such censorship on the popularity of these websites is a concern, the fines associated with the breach of regulations does not bode well for these companies (see RenRen Sells Off Its Businesses To Rivals).

Renren also announced that it will restructure its games division, halting the in-house development of games and instead looking to source games from other publishers. In the transition to the new process, game revenues are expected to take a hit as new game releases halt. Group buying was another area in which Renren scaled back its presence. In 2013, Renren sold 59% of its group buying division Noumi to Baidu for $160 million. In January 2014 it sold its remaining stake to Baidu, eliminating its presence in the group buying space (See How Can Baidu Grow Its Group-Buying Business?).

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1. Renren Fails To Keep Pace [↩]
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