By Luanne Teoh on 10-19-2011

Chinese social newtwork giant Renren has agreed to purchase 56.com a video sharing site (similar to YouTube). Renren, China’s version of Facebook (Facebook is blocked in China) has around 100 million registered users.

“Video is increasingly becoming an important part of” usage, said James Liu, the company’s chief operating officer, in an interview with The Wall Street Journal, adding that Renren has been watching this area “for a long time.”

Renren recently went public on the NYSE in May this year and posted $800,000 in net income in Q2, up from a $25.5 million net loss a year earlier. With this acquisition, Renren which has only showed marginal profits since its listing will have the added financial pressure as bandwith costs in China are high.

Huihuang, Renren’s Chief Financial Officer said that ”the entire online video-sharing sector is not profitable at this moment” and “compared to other major players,” 56.com’s losses are much smaller. ”As a company, we want to focus on things that benefit us in the long term instead of the short term,” she said.

Renren’s CEO Joe Chen said that 56.com will continue to be operated as a separate website but that user accounts and other functions between the video site and Renren will be linked. Renren plans to differentiate itself from China’s top online video companies, Youku.com Inc. and Tudou Holdings Ltd., by focusing on short video clips uploaded by its users rather than licensing content such as television shows and movies.”

This move shows perhaps a new wave of technology-based acquisitions in China — one similar to Silicon Valley where companies buy out smaller ones in order to scale or acquire its user base.

About Luanne Teoh

Luanne is a senior correspondent for BizTechDay focused on Small Business Tech, Mobile and China based in San Francisco. In the last 17 years, she has helped launch start-ups and turned around failing operations. Her international work experience include both public and private corporations in Southeast Asia, Australia and North America. She has previously worked for Oracle Corporation, SonyBMG Music, Universal Music, Catcha Media and SOH Inc. Apart from a keen interest in technology, Luanne is also and avid explorer of the globe, cultures and people.

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