Alipay’s Transfer Sowed Doubt in China Internet Companies, Renren CEO Says

By Emily Chang and Xu Wang - Oct 1, 2011 6:12 AM GMT+0700

Play Video

Sept. 30 (Bloomberg) -- Joe Chen, chief executive officer of Renren Inc., talks about Alibaba Group Holding Ltd. Chairman Jack Ma's decision to spin off the company's payment business and the outlook for Renren's customer growth and e-commerce revenue. Chen speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

Renren Inc. Chief Executive Officer Joe Chen criticized Alibaba Group Holding Ltd. Chairman Jack Ma over the decision to spin off the company’s payment business without the knowledge of key shareholders, including Yahoo! Inc.

Chen, speaking in an interview with “Bloomberg West,” referred to the spinoff of Alipay to a company owned by Ma.

The transfer caused concern that Alibaba would become less valuable to Yahoo and other owners. While Yahoo and Alibaba later reached an agreement aimed at compensating Alibaba’s owners for the loss, the incident undermined confidence in Chinese Internet companies, Chen said.

“It’s quite unfortunate,” Chen said. “It caused a lot of uncertainty about Chinese Internet companies.”

Renren, which completed an $855 million initial share sale this year, will probably get most of its revenue from e-commerce in three to five years, Chen also said in the interview. Advertising currently makes up most of Renren’s sales, he said. The company has 130 million users and is adding 2 million to 3 million active users a month, Chen said in the interview.

The company’s “core audience” includes college students and high school students bound for college, as well as “young, white-collar professionals living in big cities,” Chen said.

“Their time is very valuable, so they’re looking for highly efficient communication platform,” Chen said. “They don’t have a lot of time to play games, but are more interested in getting the biggest bang for the buck to save money.”

Users Want E-Commerce

“E-commerce is the best way to monetize,” under those circumstances, he said.

Yahoo’s former CEO Carol Bartz was ousted Sept. 6 in part over her handling of assets in Asia, including the stake in Alibaba. She feuded publicly with Alibaba’s Ma.

Beijing-based Renren agreed Sept. 27 to buy online video operator 56.com for $80 million in cash. Renren’s bigger Chinese Internet rivals including Baidu Inc. and Tencent Holdings Ltd. (700) have stepped up acquisitions to expand in China, the world’s biggest online market by users.

Renren is bolstering its social-networking service, which is similar to Facebook Inc.’s, by offering online videos and daily deals, as competition with Tencent and Sina Corp. intensifies.

To contact the reporters on this story: Emily Chang in San Francisco at echang68@bloomberg.net; Xu Wang in New York at xwang206@bloomberg.net.