inside renren inc. (nyse: renn) - by ichinastock

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RENREN INC.

iChinaStock.com profiles Chinese firms that are publicly-listed or may list soon in overseas markets

REPORT BY

INCLUDES RENREN, RENREN GAMES, AND NUOMI

© March 2011 iChinaStock

NYSE: RENN (INTENDED)

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SUMMARY

  Renren Inc. (formerly Oak Pacific Interactive) includes the following properties:

  Renren (formerly Xiaonei): a real-name social network (SNS) with 31 million monthly active users and similar to Facebook in features. Renren initially launched at China‘s top universities, but has since expanded to all, though its core audience remains students.

  Renren Games: a producer of both casual and serious (MMORPG) games across Renren and other platforms.

  Nuomi: a group-buying site, launched in 32 cities across China.

  Intended IPO valuation: approximately $4.3 billion. NYSE: RENN.

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Renren Inc. (formerly Oak Pacific Interactive)

Nuomi Group-buying site

Renren Real-name social network

Renren Games Casual and serious games

SIMPLIFIED STRUCTURE Softbank 35% stake

Disclaimer: This is not the firm’s official structure, but rather iChinaStock’s representation of the firm’s key properties

Note: Renren Inc. sold off portal Mop.com for approximately $18 million in December 2010 to Oak Pacific Holdings. It will not be part of the IPO.

traffic traffic Additional properties: •  Jingwei, business social network

Earlier investors: General Atlantic (lead), Doll Capital, Technology Crossover Ventures, Legend Capital

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TIMELINE

Xiaonei founded by Wang Xing, Wang Huiwen, Lai Binqiang and Tang Yang. It launches at China’s top universities, Tsinghua and

Peking

2005

2006

2007

2008

2009

2010

2011

Launches open platform for 3rd party developers

Xiaonei relaunches as Renren (meaning people’s web) to expand beyond the student demographic with a major

advertising campaign. Launches domain renren.com

Renren expected to seek IPO

Launches IM feature and WAP mobile version

Softbank increases stake in OPI to 35%, totaling $430 million in

investment

OPI merges users of Kaixin.com into Renren after losing a copyright infringement lawsuit to competitor

Kaixin001.com

OPI acquires Xiaonei

Oak Pacific Interactive (OPI) receives $48 million investment from General Atlantic (lead investor), Doll Capital, Technology Crossover Ventures, and

Legend Capital

OPI renamed Renren Inc.

Launches Jingwei, business social network

Launches Nuomi, group-buying site

Xiaonei opens to non-students

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RENREN USERS

Note: MAU = monthly-active users (unique log-ins) and Registered Users = activated users Source: Renren Inc. F-1 SEC Filing

Millions

“Our user base consists largely of Chinese college students, young urban professionals, and high school students… We are currently striving to expand our user base among white-collar workers in their late 20s and early 30s as well as high school students.”

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RENREN INC. REVENUES

Note: Adjusted net income accounts for stock-based compensation and certain other non-cash costs. It is the basis upon which many investors appraise companies filing for listing.


Millions USD (rounded)

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BUSINESS MODEL   The Renren social network (SNS) sells advertising to big brands.

  Renren SNS also channels traffic to Renren Inc.’s other properties, Renren Games and Nuomi. Those sites sell internet value-added services (IVAS) directly to users rather than rely upon advertisers.

  Renren Games generates its revenues via virtual goods sold primarily in MMORPG games.

“Over 60% of the users of our nuomi.com social commerce website are users of renren.com. Similarly, revenues from our online games depend on the continued success of our SNS platform, as many of our game players access our games from renren.com.”

Source: Renren Inc. F-1 SEC Filing

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2010 REVENUE BREAKDOWN



Internet Value-added Services (IVAS) accounted for 58% of total revenues

One MMORPG game, Tianshu Qitan, accounted for 31% of online game revnues or 14% of total

revenues. It was first launched in 2008.

Includes Nuomi, group-buying site

248 big brands accounted for all advertising in 2010.

Renren only recently began to target small to medium-

sized enterprises.

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ADVERTISING I

  Renren sells:   “Display advertising, social advertisements,

promoted news feed items, fan/brand pages, in-game advertising… branded virtual gifts and other formats such as sponsored online events.”

  Renren is more aggressive about advertising than Facebook. It features big banner ads and branded mini-site campaigns that Facebook does not enable.

Revenues Millions USD (rounded)


“Our online advertising serves a broad base of advertisers, including leading international companies, such as Coca-Cola and Nike, and leading companies in China, such as Meng Niu Dairy and China Merchants Bank, and we recently began serving small- and medium-sized enterprises.”

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ADVERTISING II Total Advertisers Avg. Spend per Advertiser (USD)


  Renren currently derives its revenue from 248 major advertisers with high average spend ($129,000)

  The majority of Renren’s advertising is primitively targeted or not targeted at all   In 2010, 94% of advertising was sold “by time” rather than by “ad

impressions” (CPM)

  Facebook, by contrast, has a far more targeted advertising system that serves the “long tail” of small to medium-sized enterprises   Renren has recently began to offer more targeted advertising in an effort to reach

small to medium-sized enterprises

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IVAS: GAMES

  Renren Games produces both MMORPG games, traditionally one of the most lucrative channels on the Chinese internet, and casual games

  Games are also licensed from third-parties


“The substantial majority of our online games revenues are generated from users’ purchases of in-game virtual items, such as accessories and pets, on game.renren.com, our online games center”


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IVAS: OTHER

  Includes (2010 revenues): •  Open Platform ($3.5 million USD)

•  VIP Memberships ($2.1 million USD)

•  Other (including web page creation for customers) ($3.3 million USD)

•  Nuomi ($1.2 million USD)


Open Platform

  Applications and social games are not as popular or developed on Renren as they are on Facebook. On the other hand, Renren directs users towards its MMORPG games which are highly monetizable.

  The open platform allows third-party developers to contribute, though Renren still develops its own social games via Renren Games. Renren generally takes a 52% share of revenues generated by third parties.


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NUOMI

  Group-buying site Nuomi.com launched in June 2010 (Nuomi means glutinous rice in Chinese)

  Generated $1.2 million in revenues in 2010

  In 32 cities as of March 31, 2011

  Competitors are numerous: meituan.com, lashou.com, dianping.com, etc.

“Our first social commerce deal, on June 23, 2010, offered a pair of movie tickets at 23% of face value for Jackie Chan Movie Theatres, a new, premium movie theater in Beijing. In one day, Nuomi users purchased over 150,000 pairs of movie tickets for Jackie Chan Movie Theatres.”

Total units sold (millions)


Total paying users

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COMPETITORS Renren.com is not nearly as dominant in social networking in China as Facebook is in the United States.

It faces strong competition form several mainstream networks as well as many more niche ones.

Qzone is a nickname social network with a younger and more rural userbase than Renren. It claims to have 481 million active users, though in reality many of its users likely use the service infrequently. Qzone is operated by Tencent (0700.HK), so can

both draw from and direct traffic to other Tencent properties.

Pengyou is Tencent’s real-name social network, its answer to Renren (or Facebook). It aims to attract an older and more urban userbase than Qzone. It claims to have

131 million active users, though “active” is not well defined.

Kaixin001is a social network with a user base of white-collar workers in China’s top-tier cities. It rose to prominence on the popularity of its social games and post-

forwarding feature. It claims 95 million registered users.

Sina Weibo is a popular microblog by Sina (NASDAQ: SINA). Sina Weibo has considerably more “social networking” features that other microblogs like Twitter. It competes Renren for user attention on the Chinese internet. Sina Weibo claims to

have surpassed 100 million registered users.

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FINANCING

•  In 2006, General Atlantic led an investment of $48 million in OPI. Other investors included Doll Capital Management, Technology Crossover Ventures, and Legend Capital.

•  In May 2008, Softbank increased its investment in OPI to $430 million, in exchange for a 35% stake in the group.


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LISTING STATUS

•  On April 15, 2011 Renren Inc. filed for IPO on the NYSE under the ticker RENN with an approximate valuation of $4.3 billion. Underwriters are Morgan Stanley, Deutsche Bank, and Credit Suisse.

•  Renren Inc. intends to raise $508 to $580 million for : 1.  $180 million for technology and research 2.  $180 million for sales and marketing 3.  “The balance for general corporate purposes, including strategic

acquisitions and investments”

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OFFICIAL STRUCTURE


CEO

= iChina Stock notes

Softbank

Renren + Renren Games Renren Advertising Nuomi

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PLANNED POST-IPO VOTING RIGHTS

Source: Renren Inc. F-1 SEC Filing = iChina Stock notes

CEO Softbank

Note: SB Pan Pacific Corporation is a wholly-owned subsidiary of Softbank

Due to a special class of super-voting shares, CEO Joseph Chen will retain 55.9% voting power

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RENREN HOMEPAGE Game mechanics encourage

users to log-in more frequently to “level-up”

Status update

Newsfeed Applications

Link to game.renren.com

Friend suggestions

Birthdays

System notices

Footprints

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RENREN GAME CENTER

Tianshu Qitan MMORPG

Featured games New games

Popular games

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TIANSHU QITAN (MMORPG) Tianshu Qitan (天书奇谈), an MMORPG popular with

females that accounts for 14% of Renren’s net revenues Game is a flash-based, in-

browser game. Originally developed in 2008.

Users can log-in directly with their Renren account

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RENREN DIARY

Advertisement for a current Nuomi deal in

your city

Diary entries by friends

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NUOMI HOMEPAGE (SHANGHAI)

Each city features multiple deals simultaneously

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NUOMI DEAL

Deal prices tend to be lower for Chinese group-buying sites

than US ones (¥5 = $0.76)

Nuomi has launched a “no questions asked” 7-day return policy

Share to Renren “Likes” on Renren

Additional deals

95% off on a coupon booklet for the premium Shanghai Xintiandi shopping center

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ADDITIONAL SOURCES

•  Renren Company Profile Of Renren by iChinastock: ��http://www.ichinastock.com/RENREN

•  Renren Inc. Corporate Site: ��http://renren-inc.com/en

•  Renren Games Slideshare Presentation:

http://www.Slideshare.Net/Chendi1986/Renren-games-feb-2011-7187941

•  What Makes China’s Top Social Networks Tick?��http://mashable.com/2011/03/18/china-top-social-network

•  Renren Setting The Standard for China’s Social Networks:

http://techrice.com/2010/12/21/renren-setting-the-standard-for-chinas-social-networks

•  Renren Inc. F-1 SEC Filing ��http://www.sec.gov/Archives/edgar/data/1509223/000119312511099693/df1.htm

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ABOUT ICHINASTOCK

Snowball Finance is a financial media platform that includes two sites. One is iMeigu.com, a Chinese-language site that covers all US-listed stocks. The other is iChinaStock.com, an English-language site that covers Chinese stocks listed in the US. Each site provides stock quotes, business news, and analysis. Snowball Finance has also established my.iMeigu.com, a Web 2.0 platform for global investors to share news and insights on stocks they follow. Snowball Finance also publishes the iChinaStock 30 Index, a representative sample of Chinese stocks on the NYSE and NASDAQ.

© March 2011 iChinaStock

inside renren inc. (nyse: renn) - by ichinastock

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