Is China exporting a dotcom bubble?
By George Chen
The opinions expressed are the author’s own.
“Will you marry me, Nasdaq?” that may be the message Jiayuan.com is keen to send to the Nasdaq and potential investors.
Jiayuan.com, an online dating service founded by a student of the Journalism School of Fudan University in 2003 and whose name means “a good destiny of love” in Chinese, today applied for an initial public offering in the United States. It’s the latest in a series of Chinese Internet technology and social networking companies to apply for a U.S. listing in recent months.
Now, I’m not a chartered financial analyst or Internet industry expert, so I just want to look at this wave of IPOs from a more personal perspective. First of all, I do believe there’s a reason behind the current rush of listing applications; it’s not mere coincidence!
The financial crisis changed the global landscape for many sectors, not only the financial industry but also many consumer-driven services. Wall Street investors have long been worried about the performance of traditional media companies such as the New York Times Co, while Google and Apple are already too expensive for some.
Youku.com and Renren.com, clones of YouTube and Facebook in China, naturally sound like a more comfortable investment solution to many Western investors who may have missed the previous gold rush for Google and Apple and are looking for something similar with a cheaper price tag.
Thanks to public relations agencies and global media outlets, once you give Renren.com a nickname like “the Facebook of China”, investors have a tendency to be wowed no matter how much they know of the differences in business models between Renren.com and Facebook, or about the way Renren.com really works and its impact on Chinese users.
Let me suggest, dear investor, that before you subscribe to the Renren.com IPO, you register an account and post a message – by the way, be careful you don’t post anything politically sensitive or your post will likely disappear rather quickly – or set up an event and upload some photos to share. User experience is important before deciding to pour big money into the “Facebook of China”.
If you don’t speak or write Chinese, such a test could be challenging. How about asking a friend in China how they feel about Renren.com. Don’t just ask the banker or asset manager trying to sell you the IPO, you need your friend’s personal feedback. In my not so financially professional view, that could be more important than reading through hundreds of pages of IPO prospectus.
Of course, I’m not just picking on Renren.com. You should do the same for any of the upcoming China IPOs , including Jiayuan.com. There are many stories of successful love and marriage on Jiayuan.com, however, none of them involved anyone I know of.
Jiayuan.com says it operates the largest online dating platform in China and had more than 40 million registered users at the end of March. However, only 4.74 million of those user accounts were active, on average, during the first quarter of 2011 and less than 1 million of them were paying accounts. This dating site is seeking up to $100 million from a Nasdaq IPO.
“Don’t be fooled by the apparent prosperity of the industry. What is important is how much you can achieve … and whether your products are attractive. So don’t be dazzled by sudden changes in the market, which is on fire,” said Robin Li, founder and head of China’s largest search engine Baidu, which has a much bigger market share than Google in the world’s No.2 economy.
When Renren.com announced its IPO plans, Chinese media were overjoyed. Numerous newspapers carried similar headlines proclaiming that Renren.com, from China, would become the world’s first big social network IPO. It does make me feel that Renren.com is now more powerful than Facebook, at least for Chinese media.
As my editors often warn me when I report breaking news, “First be right, and then be first.” The same should also apply to the likes of Renren.com.
George Chen is a Reuters editor and columnist based in Hong Kong.
Photo: An employee is seen through a glass wall as she walks past the logo of Youku.com above the reception desk at the company’s headquarters in Beijing, December 9, 2010 REUTERS/Soo Hoo Zheyang