Renren and Facebook Both Post Net Losses: Does This Spell Trouble for Social Media?

Facebook’s post-IPO doldrums have been the talk of the town in international tech circles, and the company’s posting a net loss for Q2 of this year hasn’t helped. But Renren, the (ugh) “Facebook of China,” appears to be copying more than just Facebook’s trademark design and user experience; it appears the company is also “copying” Facebook’s financial woes.

In its Q2 numbers, the Chinese SNS posted a loss of more than $20 million. The company has seen strong user growth over the past year, with monthly log-in users growing 31 percent to a total of 45 million. But, much like Facebook, it seems to be having trouble converting those users into profit. As you might expect, this has not been great news for Renren’s stock, which took a sharp drop following Tuesday’s Q2 results announcement.

Facebook and Renren now find themselves in a similar quandary, but how will they attempt to escape it? It’s clear that there are at least few kinks to work out of the massive social network model both sites use. Given that they both had strong revenue streams, these Q2 results aren’t apocalyptic — don’t expect either company to disappear overnight. But the fact that they’re both losing millions of dollars means that something needs to change.

This is especially interesting given that newer microblogging social networking sites like Twitter and Sina Weibo are also having problems with monetization. Is it possible to build a really big and really profitable social network? Probably. But it seems like no one has actually figured out just how quite yet.