If investors were hoping that Renren's
The real-name network is growing quickly, but apparently not moving fast enough to justify its original $5.6 billion market cap, with the equivalent of roughly 400 million ADS outstanding.
Revenue in its latest quarter grew 53% to $30.4 million, fueled by a 94% surge in online advertising to $16.9 million. Web ads now make up more than half of Renren's revenue; the balance comprises online games, social commerce, and other value-added services.
The company's online advertising growth is impressive. Chinese online ad-sellers Baidu
However, Renren's adjusted profit was more than halved to $2.3 million. Sure, Wall Street was settling for breakeven results on $29.5 million. One can also argue that Nuomi -- the social commerce initiative that Renren launched last summer -- is an early drag on performance. Back out Nuomi's costs and contributions, and adjusted net income actually grows by 23% during the quarter. However, it's not encouraging to see selling, marketing, and G&A costs grow twice as quickly as Renren's top line.
The market isn't happy with Renren's guidance for the current quarter. The company expects $33.5 million to $35.5 million in Q3 revenue. The 54% to 63% top-line spurt that this represents would translate into accelerating year-over-year growth, but analysts were already perched at the high end of that range with their target of $35.2 million.
They sure don't make China's dot-com darlings like they used to. Some of the past year's more ballyhooed IPOs in this sector -- video-streaming site Youku.com
Renren will get better. Once the scalable merits of its 124.2 million activated users kick in, margins will widen, and adjusted earnings will outpace top-line growth. As long as Renren doesn't yield the social networking crown to someone else, it will grow into a worthy dot-com darling.
Unfortunately, the company got cheated by its starting line. Baidu and SINA
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