Shares of the Chinese social networking site Renren surged on their trading debut in New York on Wednesday. The company raised $743 million from the offering.
Renren has been called China’s answer to Facebook and is one of the few publicly traded social networking sites and the latest symbol of China’s soaring Internet sector. It is the largest social network in the country that has users’ real identities, with over 117 million users. Renren also has a daily deal site called Nuomi.
Interestingly, China has the world’s largest number of Internet users; roughly 457 million compared to Facebook’s 600 million. In recent years, the country has had explosive growth in social networking and microblogging services.
In the past year, shares soared for two other Chinese Internet companies, Dangdang, an online retailer, and Youku, a video site, after they listed in the United States. We must realize, like Renren, these Internet companies fully cooperate with the regime’s censorship and continued repression of free speech. Yet, the networks list in the US market. Whereas US Google was banned in China, its stock has not fared well since.
It is obvious that investors know the value of China’s social media. There are three other big Internet companies from China on the US market as well: Alibaba, Baidu and Tencent. The market value of Baidu is nearly $50 billion on the Nasdaq. Recently, the company’s chief executive, Robin Li, was named the richest person in China.
David Chao, a general partner of the venture capital firm DCM, which owns 7.5 percent of Renren, said in an interview, “If you accept the thesis that China is the world’s largest Internet market by number of users and that it will soon become the second-largest media market in the world, then the valuations for the market leaders in each segment of the Internet space — if they can maintain their position long term — are justified.”
Obviously, Google was smart to try and get a foothold in the Internet market in China. Perhaps, the company will be able to return after careful negotiations about free speech.