The headline numbers may seem encouraging in eyeing Renren's (NYSE:RENN) quarterly report last night. Revenue of $30.7 million exceeded the $30.1 million that Wall Street targeted. The Chinese social networking company also surprised investors by posting a chunky profit.
However, it doesn't take long for these glowing nuggets to go radioactive. Renren's revenue still plunged 29% over the past year, weighed down by double-digit percentage declines for both its namesake social networking site and the online gaming operations that have poorly mishandled the growth baton.
The profit is a mirage. Renren scored a juicy payday after selling what was initially a majority stake in its group-buying website Nuomi to Baidu (NASDAQ:BIDU). It was a surprise to see Renren be so quick to let go of its one growing property, but Baidu's money was too tempting to resist. However, it's not as if shedding Nuomi would result in improving bottom-line results beyond the one-time asset sale gain. Renren's operating loss actually nearly doubled to $42.6 million during the fourth quarter.
Yes, Renren's a mess.
When Renren went public at $14 three years ago, it was hailed as China's Facebook (NASDAQ:FB). It probably helped that Facebook had yet to go public, giving investors little to compare its performance to. Renren has always struggled with profitability in its public tenure, but at least it was growing until the past few quarters.
Comparing Facebook to Renren is a silly exercise these days. It's not just that Facebook is very profitable. It is growing at a time when Renren is going backwards. Monthly unique log-in users have fallen from 56 million to 45 million through the course of 2013.
There's also the mobile challenge. Facebook has embraced new ways to monetize usage on smartphones and tablets. Renren is struggling on that front. It even singled out "the continuing migration of our traffic from PC to mobile" as a reason for its sharp top-line slide.
Renren's in a bad place. It has no more growing assets to sell. Fading usage at a time when the Chinese Internet market is expanding isn't pretty. The Internet remains a vibrant playground for investors in China, and market darling Baidu bears that out. Renren just isn't clicking with users, and that's not going to lift this busted IPO anytime soon.