As far as I know this is the first social network to officially announce a payment platform. While I have yet to look at the specifications of the system, this is a major announcement and I’d imagine that other platforms will follow suit. When it comes to virtual currency, Asia has been leading the pack for years, as they have been selling digital goods over social networks for users to customize their personal avatars.

The model has proven profitable. As we wrote back in May, 51.com, a competing Chinese social network, has achieved cash flows of over $44 million through the sale of virtual goods. The virtual currency model has been used through numerous offer exchange programs on Facebook applications, but so far, none of this has been tied directly to Facebook the company.

Earlier this year, Facebook posted on the developer forums that they were looking for developers that wanted to beta test their payment system. Unfortunately since then, there has been very little activity. As many have suggested some of this is due to internal conflict over whether or not a payment platform is even worthwhile. It looks like Xiaonei will be the first to test out whether or not this works. My guess is that we’ll see other social networks hop on board in the very near future.

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While the U.S. may be close to social network market saturation, there remains to be massive growth opportunities abroad, especially in Asia. Facebook recently launched the Chinese version of their site (along with over 15 other languages). The launch of these languages are most definitely contributing to Facebook’s continued rapid global growth.

MySpace has experienced a substantial slowing of growth domestically and their shift to Asia highlights the new social network battleground. Both MySpace and Facebook face significant competition in China with companies like 51.com and Xiaonei both attracting millions of users and both with substantial war chests. Xiaonei recently raised $430 million and 51.com raised over $50 million as well.

Asian social networking will definitely be a hot area for people to keep their eyes on over the coming months as the battle heats up!

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Yesterday, Xiaonei announced the launch of their “Open Platform” initiative which mimics Facebook’s platform and an application fund, just as Facebook announced last year. Facebook’s fund hasn’t been the most successful though based on the lack of announcements coming out of Facebook about the fund. Other funds have also found it challenging to generate substantial returns on any of the platform applications.

So how much money is Xiaonei and their partner venture fund providing developers with? No exact numbers have been mentioned aside from “several million RMB” (1 USD = 8 RMB). It will be interesting to see how the battle between Facebook and Xiaonei pans out in China. Facebook recently launched their Chinese version but rumors have surfaced that the site appears to be inaccessible to a large number of users in the country potentially limiting Facebook’s growth.

Whatever happens to Facebook in China, it is clear that Xiaonei will be one of their primary competitors.

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This could potentially be the largest round of funding for a social networking site to date. Alexa data ranks the site as the 370th most popular site on the web. I’m not sure if this data is completely accurate but no matter what their traffic is, the company is cash flow positive according to an interview which Matt Marshall had with one of early investors, David Chao.

Matt also questioned David Chao about the design of the site and how it resembles Facebook. David said that he thinks the site actually resembles IBM and mentioned that many sites use various shades of blue nowadays. While it’s clear that the site is a direct ripoff of Facebook, it also appears that the investors could care less. Given that China now has the largest online population, Xiaonei is poised to potentially become one of the largest social networking sites on the web.

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