In China, Facebook Alternatives Thrive

Stocks of Country's Social Media Stars Rise Ahead of IPO

Anticipation over Facebook Inc.'s pending initial public offering has fueled a recent surge in stock prices of social media companies in China, where Facebook is blocked.

But while China's some 500 million Internet users have flocked to locally operated social networking sites in Facebook's absence, a lack of a dominant player in the sector makes it unlikely that a "Facebook of China" will appear anytime soon.

Shares of New York Stock Exchange-listed Renren Inc., a Facebook-like social-networking site, climbed 33% since market close on Thursday to $5.55 at the end of trading Tuesday following reports that Facebook expects to file for an IPO this week. Shares of Nasdaq-listed Sina Corp., which runs a popular Twitter-like microblogging service called Weibo, rose 13% to $70.27 in the same period.

The jump comes after shares of Chinese Internet companies have taken a hit after a number of high-value listings last year, in part sparked by investor concerns over fraud and corporate governance at some smaller Chinese firms.

"The 'Facebook' effect on Chinese Internet companies has already started," said Sina Chief Financial Officer Herman Yu. "A successful Facebook IPO may further heighten investor's interest in social media" and other potential leaders in related categories such as "open platform, social advertising and e-commerce."

Chinese social media companies, including Sina, Renren and Tencent Holdings Ltd., have thrived in terms of membership and activity over the past two years despite requirements from authorities to filter content based on censorship regulations.

But because none of the companies singularly have a presence as ubiquitous as Facebook's presence in the U.S., they don't have as much influence over the online advertising market.

Censorship requirements and other limitations on foreign companies in China have made it difficult for companies like Facebook to enter the market.

In 2010, Facebook Chief Executive Mark Zuckerberg said he was hoping to figure out the "right partnerships that we would need to do in China to succeed on our terms."

Mr. Zuckerberg said he was learning Chinese, and went to China to meet with executives at leading Internet companies in the country.

Indeed, Facebook's membership has become increasingly global, with 80% of its more than 800 million members located outside the U.S., making the relatively small representation from China in its network increasingly glaring.

But authorities have initiated campaigns to crack down on unwanted Internet content since then, and Facebook has not yet established operations here. Facebook and other sites, including Twitter Inc. and Google Inc.'s YouTube remain blocked by Web filtering technology, and at this point, analysts say the web services would have a hard time competing with established local rivals.

Gary Wang, chief executive of online video company Tudou Holdings Ltd., said he hopes the IPO will turn more attention to China.

"The market has been fixated on the Facebook IPO for so long," Mr. Wang said. "I hope their IPO will be done successfully and have a good post-IPO performance...the market will see there are plenty of great companies out there, including the Chinese Internet companies."

While China's social media sites are quickly growing, they still have far fewer members than Facebook. Sina's Weibo site had 227 million user accounts at the end of September, the latest number available. Renren had 137 million activated users as of September-end. Twitter has about 100 million active users.

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