HONG KONG - The success of LinkedIn,
the United States-based professional networking
site, in selling shares to the public is raising
questions on when the first comparable Chinese
company, operating in the world's largest Internet
market, will follow suit.
LinkedIn shares
more than doubled during their first day of
trading on May 19, and are now trading at around
US$65.53, or 45% more than the initial public
offering (IPO) price of US$45, which valued the
eight-year-old company at $4.3 billion.
The company was the first major US
social-networking site to hold an IPO, but was
beaten to the post by Beijing-based Renren, which
listed on the New York Stock Exchange on May 4.
Renren came to the market as anticipation grew for
the listing prospects of its closer US social
networking counterpart, Facebook, now
tipped to sell shares this
year or early in 2012 at a price that would value
it at anything between US$50 billion and $100
billion.
Chinese developers have long
looked to the US for inspiration, often tweaking
what they find on original American sites to allow
for local conditions and interests, and sometimes
then selling shares on the back of strong local
revenues.
Internet search company Baidu,
for example, was founded in 2002, six years after
Google, and listed shares on Nasdaq in August
2005, 12 months after the US search giant. Shares
in both companies have since soared in value -
Baidu by 47 times its IPO price (including a 1 to
10 stock split), and Google by 5.8 times.
Just as Google inspired Baidu, LinkedIn,
launched in spring 2003, has its imitators in
China, and although the Chinese market for
professional social networks is still fragmented
and development slow, industry insiders believe
growth will accelerate in the next two to three
years.
Beijing-based Tianji, founded in
2005, is one of the first and the largest to
follow a LinkedIn-type template. It has 6 million
members in China and is adding 200,000 more a
month. About 15% of its members visit the site
twice a month. In comparison, Renren has more than
117 million members.
Tianji founder and
chief executive Derek Ling says professional
social networks have grown more slowly in China
because the LinkedIn model does not fit China's
environment.
"It is just like Dangdang in
1999 when e-commerce did not take off. It was not
until Taobao appeared and changed user behavior
and improved infrastructure, that e-commerce
started to get popular in China," said Ling.
Founded in 1999, Dangdang is one of the largest
online bookshops in China. Taobao, the largest
online auction platform, was founded in 2003.
"On the other hand, group-buying sites got
really hot almost immediately after Groupon-like
sites launched in China," said Ling. The reason is
simple: people love cheap bargains in China and
e-payment is readily available. (Chicago-based
Groupon, which offers discounted gift certificates
usable at local or national companies, filed its
registration for an IPO on June 2 and is expected
to raise up to $750 million, MarketWatch
reported.)
The biggest challenge for a
professional social-networking site in China is to
have users putting their real information on the
network. Another is the different cultural norm.
LinkedIn users frequently get requests such as "I
need this and this", or "I need to hire such and
such". In China, it would be "uncool" to state
those requests directly, said Ling. "People in
China have to be friends first before they can do
business together."
"That is why Tianji
has a lot of discussion forums, groups and events,
for the members to socialize with each other,"
said Ling. Business discussions can follow.
One newcomer to business-networking,
Beijing-based Hengzhi, founded last year, is
seeking users by offering more functions than the
LinkedIn basics, with eight business applications,
including contact management, questions and
answers, and Power Point document sharing
available. Founder Tong Li said such applications
are "very useful and help to drive quality user
growth".
The difference in cultural
approach is reflected in the success of Tencent's
QQ, the country's largest instant message
platform, which has more than 600 million users.
Teenagers assume a virtual identity in QQ and make
friends with strangers. Inviting your real friends
in the offline world to a social network is less
common.
In short, people in China have yet
to become used to the idea of "web as business
tool" and "changing people's online behavior can
take years," said Ling. The phenomenon, however,
is evolving. Ling believes the growth of
professional social networks in China will speed
up.
Social networks such as Renren have
already started to change people's behavior,
encouraging them to put their real information and
name real friends online - a key for building a
professional social networking site.
"Currently, most social networks are for
entertainment. Soon, people will ask what else
they can do with social networks. And professional
social networks, which help them to do business,
will be the answer," said Ling.
He expects
Tianji to have 10 million members by the end of
this year, and is aiming for a "critical mass" of
20 million, said Ling. LinkedIn reached its
critical mass when it had 30-40 million members,
according to an industry expert, but the US
company, which now claims 100 million registered
users, is used practically worldwide.
Tianji's mother company, France-based
Viadeo, is the world's second-largest professional
social network, after LinkedIn, with about 35
million members and a focus on Europe and emerging
markets, including China (where an
English-language, as well as Chinese, version of
Tianji is available). Viadeo shelved plans for an
IPO in May to focus on growing its business, it
said.
Tianji apart, several other
contestants compete for the title of Chinese
LinkedIn. Shanghai-based Wealink, founded in 2004,
is one of the earliest and possibly the largest.
It claims several million members and an industry
insider believes it might have more than Tianji.
It is backed by venture capital funds United
Capital Investment and SIG Capital. However,
critics question the quality of its members. "Many
of Wealink's members are freshly graduated, who
offer little value to other members," said one
industry expert.
That is in contrast to
Hengzhi and Shanghai-based Ushi, which focus on
membership quality. Officially launched last
October, Ushi has 12,000 chief executives, 5,000
chief technical officers and 75% of venture
capitalists active in China in its network, said
Ushi chief executive Dominic Penaloza.
At
Hengzhi, 60% of users hold titles of vice
president and above, said founder Tong Li. Most of
Hengzhi's members are from finance, legal,
accounting, and other professional services
industries, and are aged between 28 to 40. Almost
all have a college degree, and about half are
based in China's principal cities such as Beijing
and Shanghai, Li said.
Both companies are
relative minnows - Ushi with 200,000 members and
Hengzhi 600,000 - but are growing fast. Ushi
doubled its membership in three months to May. And
both are looking for funding from venture
capitalists.
Not to be outdone by such
upstarts, Renren, which raised $743 million with
its IPO last month, in March introduced a
professional social network it dubbed Jinwei. Its
yet-to-be-determined success may help to revive
the company's share price, which has tumbled since
surging 28% on its debut. The stock closed last
week down almost 50% from its $14 IPO price at
$7.03.
Not everyone is optimistic about
the growth of the industry. Spamming is a serious
problem on most of the Chinese LinkedIn clones.
"There are many insurance agents soliciting
business and student asking for favors," said an
industry insider.
Moreover, unlike most of
the major social networks, such as Facebook and
Twitter, LinkedIn is not banned in China, where it
has about 1 million members according to an
industry expert. Will LinkedIn be a strong player
in China? Ling of Tianji certainly believes it is
a real competitor. Nevertheless, he warned that
although LinkedIn can be used in China right now,
"it does not mean it always can".
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