Renren (RENN) faces increasing competition from the growing social platforms from the Chinese Internet giants Sina Corp. (SINA) and Tencent (HKG:0700), along with traffic monetization pressures as its users shift from PCs to mobile, says Cynthia Meng, Managing Director at Jefferies & Company, Inc.
“On RENN, when we initiated more than two years ago, we already pointed out that they are a niche player with the majority of the users coming from students: high school students and from college or graduate school students. Also two or three years ago, Sina Weibo was not as powerful as they are compared to today, and two years ago Tencent social network was not as powerful as they are today. And Tencent even has a new, very popular competitive product on the mobile side that’s called WeChat. That didn’t exist more than two years ago,” Meng said.
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Meng says the shift from PCs to mobile further pressures RENN, leading her to rate the stock a “hold.” The Internet company not only faces more competition from others, but it is still scrambling to monetize its mobile traffic through advertisements.
“These are the things Renren is facing, in addition to its own challenge of PC-based traffic transferring to mobile. They are also seeing the challenge of PC-to-mobile transition, with 50%-plus traffic on mobile and still no effective way to monetize the mobile traffic through mobile ads,” Meng said.
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