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Chinese Social Network Site, Renren Struggles as Users Leave

A new Chinese social media site was claimed to be the ‘new Facebook of China’ in 2011, however 3 years later, it seems it is more likely the Myspace of China than the Facebook. The article discusses how despite Renren being one of China’s first social media sites,┬áRenren struggles to compete with its rivals, in particular, WeChat. Renren debuted in 2011 as a hot new social media site only to have the value of Renren Inc. decline to the point where experts have advised them to sell their company. One user in particular has pointed out that “[one] gets tired scrolling through horoscopes and advertisments searching for original content”.

According to the model we’ve learned in class and in Chapter 17 about equilibria with network effects, in order for a social media site to take off, it will be unstable until it hits the tipping point of number of users, after that point, the site is set for success. Although Renren’s future looked promising in 2011, and one could even say that they did reach the tipping point at the time, it appears that the perceived value of the good has decreased in the eyes of the users who found Renren’s content to irrelevant to their interests, causing which the site to be no longer past the tipping point and become unstable.

Renren is facing great instability. It’s clear that there is “downward pressure” on the consumption of the site because as people continue to use the site, they begin to regret their decision to join. They then turn to sites like WeChat to find more interesting news about their friends. This causes the demand for the site to exponentially decrease as more and more people stop using the site. Due to network effects, the idea that a good has more value when more people use it, Renren has drastically decreased in value and the downward spiral will not be ending soon as more and more people leave. Once people started to leave the site, unless a drastic marketing plan occur, a comeback is very unlikely.

http://www.bloomberg.com/news/2014-10-28/the-facebook-of-china-suddenly-has-a-myspace-feel-to-it.html

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