It's hard to find a business executive among China's growing legions of social networking entrepreneurs who doesn't dream about building market value to Facebook heights.
Some have taken a big step toward turning that dream into reality by launching an initial public offering.
Social networking site Renren planned to raise more than US$ 500 million through an IPO in early May on the New York Stock Exchange, which invited the Chinese company's executives to ring an opening day bell.
Another Chinese social site operator, Kaixin001, has likewise applied to list on the New York bourse. An venture investment source close to Kaixin001 said company executives have been preparing for a listing since October 2010.
An iResearch analysis said Chinese social networking sites, excluding microblogs, tallied a combined 247 million users in January. These included about 100 million at Renren. Among the average 760 million webpage hits a day for the sites, the analysis found, Renren visitors accounted for about 330 million.
Several Chinese investors have thrown their weight behind Renren, including China Media Capital, which is part of the Shanghai Media & Entertainment Group, the CITIC Private Equity Fund and Alibaba Group. Together, they've committed more than US$ 100 million to buy Renren shares.
Alibaba's pledge in particular signals the Internet company's faith in social networking as a driving force for future growth in the e-commerce business, said Tao Ran, Alibaba's public relations director.
But U.S.-based Facebook, which counts nearly 700 million users worldwide and has a market value estimated at more than US$ 85 billion, is challenging the Chinese dreamers on their home turf.
Three years after registering a Chinese Internet domain, Facebook has reportedly reached an agreement to form a joint venture with an unnamed partner and indirectly break into the Chinese market, where it's main site is blocked. Specifics of the plan remain under wraps.
Renren, Kaixin001 and similar sites may have the ability to attract users, but their market value may be comprised by Facebook competition. Indeed, Renren mentioned the Facebook threat in its IPO prospectus.
Renren, which claimed about 117 million active users in March, is promoting itself as a company that combines the functions of Facebook, game site Zynga, discount coupon-promoting Groupon, and the professional networking site LinkedIn.
The company, which was called Oak Pacific Interactive before a remake in December, said its assets include the group buying site nuomi.com, game developer game.renren.com, and the proposed commercial networking site jingwei.com.
After submitting its prospectus to the U.S. Securities and Exchange Commission on April 15, Renren's asking share price range was set at US$ 9 to US$ 11. The goal is to raise US$ 507.9 million.
If the company's greenshoe option is fully exercised, IPO proceeds could rise to US$ 582.7 million, which could be translated into a US$ 4 billion market valuation for the company, putting it ahead of the listed portal Sohu and No. 8 overall in terms of market capitalization among Chinese Internet companies.
Renren and Kaixin001 say they're unwavering advocates of the Facebook principle to provide a cyberspace extension of a real social relationship.
"The greatest inspiration I got from Facebook is its emphasis on the real-world interpersonal relationship," Renren CEO Joe Chen told Caixin.
Guo Wei, vice president of Kaixin001, similarly stressed that his company's "core values" include requiring that participants use their true identities and base relationships on real interaction and social activities. Moreover, he said, the site is committed to giving users "entertainment and a pleasant online life."
Kaixin001's goal is to create an Internet platform for interpersonal relationships that extends to various online activities such as information sharing, social networking and shopping, Guo said. It should also help users build relatively simple social connections into sophisticated relationships.
In terms of research and applications for users, China's sites have closely followed Facebook. A joke among China's Internet technicians is that whenever Facebook changes the shade of blue on its website, Renren follows suit.
Chinese sites have also benefited from enhancing their sites with social networking games, which can boost website visits for given periods of time. Renren's prospectus, for example, said gaming contributed US$ 34 million, or 45 percent of its revenues, last year.
But games have life cycles, and user activity growth is not unlimited. Moreover, games can affect a social network site's reputation among Internet users. A source told Caixin that Kaixin001's managers have been vexed by its common online image as a mere "gaming and entertainment" site.
Xie Wen, an Internet critic, said China's social network sites have been too opportunistic while pursuing fast growth. He said they've relied too heavily on specific applications such as gaming and e-commerce to raise user levels and increase revenues, which in turn has positioned their sites in narrow service ranges, limiting potential customer base growth.
Facebook, in contrast, relies on a "zero application" and "infrastructure only" model. Its goal is to create a fully open, comprehensive platform for Internet users.
Renren has similarly promised to create an open platform. But Xie says this could be a "false open" if proprietary applications on the site co-exist with third-party applications.