Social websites in China that started as places to share photos and chitchat with friends are fast expanding into other realms such as job hunting, news reading and web games.

As the number of people using social networks balloons, companies that operate the sites are trying to make money from the millions of hits. Kaixin is one of those networking sites.

It's banking on web games that appeal to white-collar workers who are strong on interactivity and have the zeal to share every aspect of their daily lives with friends and colleagues.

The social network website, which saw booming development in the second half of 2008, said it has raised more than US$20 million in the past two years and started making a profit in the second quarter of this year. Kaixin founder Cheng Binghao said during a campus recruitment event in Beijing last month that the website will go public in the near future.

Public figures, brand advertisers and newspapers have opened accounts on the website, and users only have to log on to Kaixin to receive the latest updates or discount information. The model seems to be working pretty well, and Cheng is definitely making a lot of money.

Virtual gifts

Still, I have doubts that web-based advertisements will really attract users, who normally just flip through web pages and focus on the latest postings from their friends, not the details of advertisements. Kaixin also allows users to send each other virtual gifts - some of them for free; others cost 1 yuan to 3 yuan each.

It also allows users to plant their own virtual gardens. Ordinary vegetable seeds are provided free, while special ones might cost a few yuan. Although the website operator doesn't give any information on how many people are "buying" virtual gifts and plants, I don't see how these gimmicks can provide much revenue to Kaixin.

Renren.com, operated by Beijing-based OPI Group, first started as a social network site targeted at young college students. Users share their thoughts with friends and post photos on the website.

It now has at least 110 million registered users.

Although websites like Renren and Kaixin have attracted large companies to advertise such as Coca-Cola and McDonald's, they are still actively seeking new revenue streams.

In the first quarter of this year, Renren started a sub-section offering employment services for both graduates looking for jobs and companies looking to recruit staff. Currently, this service is free.

Students can fill out an online resume and submit them to companies that post job vacancies.

"The Internet is playing an indispensable role in consumers' decision-making," wrote Yuval Atsmon, an associate principal in McKinsey's Shanghai office and co-author of McKinsey's "Consumer and Shopper Insights."

"It's a big opportunity for brands to make use of all kinds of platforms, including online videos, discussion billboards and social networks," he said.

In a poll covering more than 15,000 consumers in 49 Chinese cities, McKinsey found that Chinese web users spend an average of 19 hours a week on the Internet, 2.5 hours of which are dedicated to social network sites.

One in four respondents said they would check information on the Internet before they make a final decision to buy something.

Real-time news and information services provide another avenue for the expanding social networking sites.

Instead of having to go to media sites, the news is delivered to a user upon logging in to a social network.

"Real-time news is a big trend, and microblogs are emerging as a very valuable research tool that is separate from the traditional search engines," said Dominic Penaloza, co-founder and chief executive of Ushi.cn. "It could become a very valuable tool that is faster than web-based information."

Penaloza, a Canadian native with Chinese-Filipino roots, established Worldfriends in 2002. It's a social network service for international-oriented people interested in travel, global friends and different languages.

Ushi is trying to set up a real-time information platform targeting white-collar workers and entrepreneurs looking for business opportunities.

"Our ultimate goal is to allow people to search for people and help all kinds of people to solve business problems," Penaloza said.

He is talking about building a potential platform that could potentially connect most of China's business people, including white-collar workers and entrepreneurs.

IResearch forecasts that social networking sites could attract 110 million yuan (US$16.7 million) of advertising revenue this year, nearly 50 percent more than last year, and the figure could climb to more than 199 million yuan in 2011.

Ushi was launched in February. It has just secured 10 million yuan of angel investment from four institutional investors, including Shanghai-based Milestone Capital and LF Investment.

The website is adding around 500 new members per day and claims it now has around 6,000 CEO level users.

Opportunity knocks

Ushi said it will soon launch job listings service.

It will likely charge employees according to the number of jobs they apply for. That, combined with existing membership fees, will expand revenue, Penaloza said.

He added that he is not currently considering putting advertisements on the website.

"Recruitment may turn out to be an opportunity for business people-oriented social networks because employees and employers can't get their information delivered to each other effectively," said senior analyst Li Zhi at Analysys International, a Beijing-based research firm.

Until now, small web-based interactive games and advertisements were an effective way for social networking sites to make a profit, but website owners still have to persuade users and make them more willing to pay for value-added services, she added.

"The best time to enter the market is now over, and social network sites will have to work to target a special user base," Analysys wrote in a separate report. "Those who can adapt to the specific needs of their users will have a more promising outlook."

Potential income could also come from e-commerce, search engines and analyzing data derived from the huge user base on these websites, Li noted.

Martin Sorrell, chief executive officer of WPP Group, said during the World Economic Forum in Tianjin recently that advertising on social networks should be carefully handled and not be invasive.

"That's why the search element is so important," he was quoted as saying. "If you do a search inside a social network, it means that you're looking for something specific. This is a medium with great power."



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