Facebook IPO likely to boost China's SNS

Facebook's planned initial public offering (IPO) is likely to give impetus to China's social networking service (SNS) and boost its development, industry insiders say.

Facebook filed with the US Securities and Exchange Commission on Wednesday to raise $5 billion in a preliminary IPO, one of the largest technology offering so far.

"Facebook's IPO is a milestone event in the global Internet arena," said Cheng Binghao, chief executive officer of China's top SNS site Kaixin.

"In the next few years, SNS sites will become the mainstream of the Internet, and the IPO of Facebook will make more people realize the change," Cheng told reporters in an interview.

Fang Xingdong, founder of blogchina.com and web research consultancy chinalabs.com, said many venture capitalists would benefit enormously from the IPO.

"The move will also fortify market confidence over investment in the Internet," Fang said.

Thanks to the news of Facebook's IPO, China's SNS sites have witnessed a dramatic rise in stock market. Shares of New York-listed Chinese social networking company Renren Inc., which is dubbed China's "Facebook," rose 33 percent from last Thursday to Tuesday this week, while shares of NASDAQ-listed Sina Corp., owner of China's popular Twitter-like Sina Weibo microblog service, rose 18.8 percent over the same period.

SNS sites have mushroomed in China in recent years and some of them have successfully listed on overseas stock markets.

It is estimated that 269 million Internet users in China were registered at SNS sites by the end of 2011, which had a market value of about 2.1 billion yuan (US$328 million), according to China's market research firm Analysys International.

However, China's SNS sites still face numerous problems that will impede its further development, industry watchers say.

Compared with Facebook, China's major SNS sites like Kaixin and Renren are still small-scale in user numbers and lack growth momentum, experts say.

Kaixin CEO Cheng said Facebook's going public will in the short term have a great impact on the performance of China's SNS.

"However, the long-term influence is limited due to the difference between Facebook and China's SNS sites in income structure, business model and positioning," Cheng said.

Huang Meng, an analyst with Analysys International, also pointed out that the status quo of Chinese concept stocks in the US stock market being undervalued won't change in the long run.

Huang said China's Internet companies usually lack a solid profit pattern and they are too eager to expand their business scope.

"By doing so, they have lost their core competitiveness in comparison with their foreign peers," Huang said.

However, Cheng is still optimistic about China's SNS sites in regard to their development potentials to replace traditional communication, media and business platforms in the next five years.