Why Renren’s mobile and ecommerce pivot might just make sense

It looks like Chinese social networking giant Renren is about to shift its business model in a big way. The Facebook clone is now looking to take on the mobile and ecommerce spaces. It might seem like an odd move, but it could well make a lot of sense.

According to The Wall Street Journal, Renren has been battling to compete with China’s microblogs (known as weibos) from Tencent and Sina.

It hasn’t been doing particularly well when it comes to advertising either, largely because of a reluctance on the part of advertisers to spend on social networks.

That’s why Chief Executive Joe Chen says his company is exploring other revenue options. “I’m in the camp that thinks paid services including ecommerce and gaming will be the mainstay of social networks,” he said.

The company already operates gaming, online-video and group-buying businesses which, as the Journal notes, makes it more like fellow Chinese online giant Tencent than Facebook.

It biggest focus at the moment is in mobile. WSJ reports that Renren has dedicated 45% of its workforce to its mobile operations, which it believes will bolster its other offerings. It’s group-buying effort Nuomi is a prime example of this.

“When we launched [Nuomi] two years ago, I said, Become a leading player but don’t become No. 1,” he said. “There were a lot of competitors but they weren’t rational, the price you’d pay to become the leader was too high.”

While the group-buying market was flooded a couple of years ago, things have flattened out since then with a number of competitors falling by the wayside. Nuomi has remained relatively stable and looks set to stick around for some time.

Giving it a highly functional mobile element can only help that. After all there are now more smartphones shipping in the country than feature phones, meaning that the country is heading toward everyone being connected everywhere. It’s why other internet giants such as Baidu are throwing themselves headlong into the mobile space.

Renren also says it isn’t averse to the idea of acquiring other companies. It stands a good chance of succeeding if those acquisitions are in the ecommerce space: merchandise sales on Nuomi alone are on track to surpass US$100-million next quarter. There’s no denying it knows what it’s doing then.

That said, the Chinese market is a competitive one, especially with giants such as Alibaba dominating the space. The recent scuppering of Rocket Internet’s Chinese operations shows that straightforward cloning isn’t necessarily a viable option anymore — even in the country where it first became a real phenomenon.

If Renren wants to make a really big impact in the ecommerce space, which it undoubtedly has the potential to then it’ll have to innovate. It’s already taking some big steps toward doing just that, having US$17.8-million into R&D in the second quarter of this year. That’s more than double what it spent in the same period last year.

That it’s prepared to spend on the change shows just how willing it is to make it work. It’s all in on its pivot and that’s one of the first steps to success.