China's leading social networking website operator posted better-than-expected quarterly results last night. Net revenue soared 41% to $45.2 million, fueled by a 40% pop in revenue at its namesake website and a 102% surge at its Nuomi daily deals platform. Renren's adjusted deficit narrowed at a time when Wall Street was bracing for a widening loss.
You don't have to dig deep to find the differences between Renren and Facebook. The growth at Renren's social networking site is stemming primarily from online games, which now account for 57% of total revenue. Facebook naturally has its vibrant social gaming ecosystem, but the bulk of Facebook's revenue comes from Internet advertising.
Facebook's bread-and-butter business is more like bread crumbs at Renren. Online advertising accounts for just 21% of the company's business, and that's shrinking. Internet marketing revenue rose by less than 5% over the past year. Online gaming is the real driver here with its 53% ascent.
Then we get to Nuomi. The social commerce platform is naturally going to be compared to Groupon. This is a strategy that flopped at Facebook. The world's leading social site seems to be gaining traction with Facebook Gifts now, but its attempt to take on Groupon in the daily deals space a couple of years ago failed to gain traction. The flash sales model that Groupon made popular seems all but dead domestically, but it's a different story in China where even leading online retailer Dangdang (NYSE:DANG) rolled out a new daily deals channel earlier this year.
We'll get another snapshot on flash sales websites in China when Dangdang reports on Thursday.
Renren's Nuomi is a success, even if it remains a sliver of Renren's overall business. There are now 3.1 million active paying users, up 69% from the 1.8 million people that took advantage of a Nuomi deal a year earlier. With revenue there more than doubling, we can conclude that the average active user is spending more on Nuomi.
The near term may get challenging. Renren's guidance calls for revenue growth to decelerate, climbing 23% to 27% in the current quarter. The $55 million to $57 million that Renren is targeting is shy of the $61 million that analysts were modeling. Renren isn't providing bottom-line guidance, but it's not likely to be pretty. The dot-com speedster made it a point to emphasize that it will expand its spending on mobile and other growth initiatives that won't pay off right away.
Yes, Facebook is also being pressured to make the most of the mobile migration, but it has had some initial success in the monetization process. Renren's just getting started on that front.
Facebook and Renren are two pretty different models, but it doesn't mean that investors can't win by owning both fast-growing companies.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.