Renren widens loss in Q3 to $15.4M

Chinese social networking company gets hit by higher costs and lower ad spend, and expects investments to "continue to outpace monetization" in the near term.
Written by Liau Yun Qing, Contributor

Chinese social networking company Renren has reported a wider net loss for its third quarter due to an increase in bandwidth investments and game development costs.

On Wednesday, Renren posted a net loss of US$15.4 million, compared with a net loss of US$1.2 million in the corresponding period last year.

This was despite a 47.2 percent year-over-year increase in total revenue at US$50.4 million. This was dragged down by cost of revenues which nearly tripled to US$19.5 million.

Higher value added, lower advertising
Growth came largely from Internet value-added services (IVAS) which contributed US$33.4 million, which was a 129.3 percent increase from the corresponding period of 2011.

Online game revenues brought in US$24.2 million which was a 120 percent increase. Renren explained this was driven by the growing popularity of several new in-house developed games which were recently launched.

Its group buy service, Nuomi, gained US$4.6 million in revenue.

However, its other key arm online advertising contributed US$17 million, down by 13.7 percent. Renren attributed the decrease to lower spending by brand advertisers "in a softer macro-environment, coupled by intensifying competition and continued migration of Renren's traffic from PC to mobile".

However, Renren chairman and CEO Joseph Chen, pointed out that the company had a "solid quarter of user growth".

"Our real-name user base continued to show healthy year-over-year expansion of 25 percent, as total activated users this quarter reached over 172 million, an increase of 35 million users from the same period a year ago," Chen said.

"Monthly unique log-in users also reached 48 million in the month of September, representing a 27 percent growth year-over-year," Chen added.

Renren's Chief Financial Officer Huang Hui noted that the company's "investments will continue to outpace the monetization progress in the near-term" but it remains committed to build long-term value.

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