Chinese social networking sites face revenue challenges

Updated: 2010-07-31
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Visitors at the UC Mobile Ltd booth at a technology exhibition in Beijing.
While the number of Chinese social networking site (SNS) users has been steadily increasing, growth rates in the crowded market appear to have slowed, with some firms losing users and others shutting down all together.

As of July 15, the number of Chinese social network site users hit 210 million, up 19.6 percent since the beginning of this year, according to a report by the China Internet Network Information Center (CNNIC).

There reportedly are over 100 social networking sites in China at present.

Social media sites like photo and video sharing platforms, blogs, and social networking sites encourage cooperation and interaction between users, and mainly have user-generated content.

However, booming user numbers in China have not meant a strong revenue stream for all, with two well known social networking sites - and - pulling the plug earlier this month.

Cash flow issues ended the lives of the two sites since, like most other Chinese social networking sites income was mainly from investments and advertisements.

Both sites tried to hold off their eventual demise by cutting staff before they closed, to no avail.

"It is not surprising to see this phenomenon," said a former executive working for Chinese SNS website,, who declined to be named. "I worked for renren before, and its user growth rate has slowed dramatically since the third quarter of 2009."

China's top social network sites include, and Tencent's

By mid-2009, boasted eight million daily visitors, up from five million earlier. But according to the source, growth has slowed sharply even though the site pumps millions into advertising.

Attracting and retaining new users is a common problem for Chinese social networking sites.

"I am fed up with those social networking websites," said Yin Yifan, a 24-year-old female office worker in Shanghai.

"I found I spent too much time playing social-networking games, and I finally found those games all look similar, regardless of which site you are on," she said., a Chinese social networking site targeting white-collar workers and students, saw user rates decrease 25 percent in the last three months alone, according to data from Alexa Internet, Inc, a Web information company.
Differentiating themselves from other similar SNS sites has also proven to be a problem for operators.

"Most Chinese SNS are copies of Facebook or MySpace, so they all have a similar look. If Chinese SNS firms cannot find a way to make themselves stand out and thereby turn a profit, they inevitably will close down after they burn up investment (money)," said an Internet analyst from SAIF Partners, a Hong Kong-based investment consulting company.

The market still appears very promising.

Data from Internet research company Analysys International shows that the number of Chinese social networking site users is expected to reach 510 million and sales revenue will top 979 million yuan in 2011. 
SOURCE: China Daily
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