Mediaboss Marketing

By Rick Aristotle Munarriz | More Articles September 4, 2012 |

Renren (NYSE: RENN) may relish being called "the Facebook of China," but there is really little that the two social networking websites have in common.

Outside of being busted IPOs -- with Facebook (Nasdaq: FB) trading for half of its May debut, and Renren shedding more than two-thirds of its value since going public a year earlier -- the two companies have little in common.

"I'm in the camp that thinks paid services including e-commerce and gaming will be the mainstay of social networks," CEO Joseph Chen said in a recent Wall Street Journal interview.

The emphasis on gaming is already evident. The only reason why Renren was able to overcome the dip in online advertising revenue to deliver a 48% spike in revenue was because online gaming more than doubled during the quarter.

Online gaming is a big part of Facebook's model, but only as a developer-agnostic platform. Zynga (Nasdaq: ZNGA) contributes a healthy chunk of Facebook's revenue, but Facebook is simply there to skim royalties off the online transactions. Renren is taking a more hands-on approach in developing the games that now make up more than half of Renren's revenue.

Renren is also differentiating itself from Facebook by investing in the daily deals space. Facebook tried to hop on the Groupon (Nasdaq: GRPN) bandwagon, but jumped off last year before jumping off was fashionable. Renren is committed to keeping its two-year-old Nuomi offering growing. The Groupon-like group-buying site is expected to drum up merchandise sales of more than $100 million next quarter.

Will the sum of Renren's parts be enough? It may be that Renren is simply trying to do too much. Being the master of all trades may eventually get in the way of running a social networking website. However, since monetizing social networking through online advertising appears to be a taller task in China than it is globally for Facebook, it's hard to argue with Renren's approach of trying on many different hats until it finds one that fits.

Now it's only a matter of seeing which of the two dot-com disappointments bounces back first for investors. One of the Fool's top tech analysts breaks down the chances of Facebook making its comeback first in our brand-new premium research report on Facebook, which details the opportunities and challenges in store for its shareholders. The report includes a full year of updates, but time's a-ticking. Check it out now.

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3 Crucial Reasons Why Renren Is No Facebook