Top social-networking website in China plans to consolidate its status in largest online market

HONG KONG - The top social-networking service in the world's biggest Internet market was created by graduates of a prestigious university to help students communicate with each other. And it's not Facebook Inc.

Renren.com leads China's surging social-networking market with more than 160 million registered users, according to Analysys International in Beijing. Its competitor, Kaixin001.com, has more than 93 million.

An advertisement for social-networking website Renren.com is displayed at a subway station in Beijing. [Photo/China Daily]

"Our service is basically the same as Facebook's, in terms of functions and features," said Donna Li, general manager at Renren. "We are more tailored to the Chinese market."

With Facebook's valuation topping $63 billion, Renren and its peers may be the next investment opportunities in a market with more Internet users than the combined populations of the United States and Japan.

Those sites and competitors, Tencent Holdings Ltd and Baidu Inc, have room to grow as the online advertising market is projected to triple to almost $13 billion by 2014.

"Advertisers have really warmed to the new social-networking sites very quickly," said Steven Chang, chief executive officer for China at Zenith Optimedia, the media unit of Publicis Groupe SA. "A lot of advertisers are willing to do business with the new social-media sites because many of them actually use the services."

Renren, or "everyone" in Chinese, is probably preparing for an initial public offering, said Michael Clendenin, managing director at consultants RedTech Advisers in Shanghai. The site's biggest investor is Japan's Softbank Corp. Kaixin001.com, founded by former Sina Corp executive Cheng Binghao, also is seeking a listing, Clendenin said.

Online advertising in China probably totaled $3.9 billion last year and may climb more than 30 percent annually to $12.9 billion by 2014, according to estimates from Susquehanna International Group LLP in December. The portion spent on social networking will probably double to 24 percent that year from 12 percent in 2010, according to the Pennsylvania-based firm.

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Zeng Guojun, a cosmetics salesman in Guangzhou, uses Renren to communicate with his friends in China.

"Renren has copied most of Facebook's features, so they now do almost exactly the same things," Zeng said.

Mark Zuckerberg, chief executive officer of Facebook, visited Baidu and Sina offices in December, fueling speculation that Facebook is seeking increased access in China. Facebook may "potentially" win advertising sales from Chinese companies, Jayne Leung, head of the company's sales operations in Hong Kong, said in an interview on Tuesday.

Facebook, which claims more than 500 million users worldwide, is valued at $63.7 billion, according to the secondary exchange SharesPost Inc.

Renren's roots trace back to 2005, when graduates of Tsinghua University in Beijing founded Xiaonei.com, or "inside school". That was just after Zuckerberg pitched his service to fellow Harvard University students.

In 2006, Xiaonei was acquired by closely held Oak Pacific Interactive Corp, which renamed the service Renren in 2009.

"The name change was a great help for us," Li said. "Previously, our name spoke of our background in academia. Now we have a wider appeal."

Advertising on Renren has more than doubled each year since the site started selling space in 2008, Li said.