RENREN Inc., which once set its sights on becoming the Facebook of China, is pushing for space on mobile devices and is open to acquisitions as it looks to turn profitable and stay relevant in a competitive market.

Even though Facebook is inaccessible in China, Renren has faced difficulties in China’s hyper-competitive Internet market as microblogs attract growing numbers of users and advertisers hesitate to spend on social networking ads.

Now its business model is shifting. Renren chief executive Joe Chen said in an interview that in the long-term, the drivers of revenue for the company would likely be gaming and e-commerce, instead of online advertising. “I’m in the camp that thinks paid services including e-commerce and gaming will be the mainstay of social networks,” he said.

Due to that logic, Chen has sought to diversify Renren’s revenue streams, operating gaming, online video and group buying businesses. The combination of services makes the company more of a Chinese-style Internet conglomerate like rival Tencent Holdings Ltd. than Facebook.

Since it went public in May 2011 in the United States, Renren has repeatedly warned about intense competition in China’s fragmented social networking market. It has posted weak results in the past two quarters of this year on slow advertising revenue growth, but also on heavier spending as the company seeks to build out its group buying and mobile offerings. In the second quarter ended June 30, the company posted a loss of US$24.9 million in revenue of US$44.8 million.

For Renren, the key to continued growth is research and development spending, Chen said. In an effort to “grab land” in the fast growing, but still nascent mobile Internet market, Chen said the company more than doubled its research and development spending in the second quarter from a year earlier to US$17.8 million. This was due in part to the need to hire new, highly in demand engineers who specialize in developing mobile applications.

The company also is assigning 45 percent of its work force to its mobile business. Chen said he spent half of his time over the past two quarters focused on the company’s mobile push.

Although only 10 percent of the company’s revenue comes from mobile services, Chen said that its mobile gaming offerings are cash positive.

(SD-Agencies)