One of China’s biggest social networking sites has purchased a declining video sharing site, sparking some negative feedback.
Renren, valued at $5 billion earlier this year, spent only $80 million for 56.com, one of the country’s larger video sharing sites. Founded in 2005, Renren is popular with university students and was formerly named the “On-Campus Network” or Xiaonei.
The video site 56.com is also popular with young people but has often upset government regulars by not clearing its rights violations. Its rivals Youku.com and Tudou.com have pulled ahead.
Financial analysts say the purchase was a bargain for Renren because of 56.com is only losing a small amount of money and brings a large base of user generated content.
Renren CEO Joseph Chen was optimistic about the buyout, saying in a statement the deal will "further meet user needs of recording and sharing their lives through video format" on his social network
However, initial reaction to the deal by China’s netziens appears somewaht negative.
For example, Sina weibo user “YoungmanofXimentou” said “Anyone who has used Youtube will know: video sharing sites can become social networks, and it’s not just a channel for buying rights to videos. Renren’s move to buy 56 is still part of the development model for video networks, but it’s just unclear if there will be support in terms of original material on Renren.”
A commentator on the influential finance portal with business blogging, Hexun, “HexunTroy” said “Renren purchased 56 because it wants to be a social network, or because it wants to share videos? Hulu on Facebook is the coming together two winners; they help each other. … 56 doesn’t have any way of pooling funds so I understand if they want to sell but if Renren does not want to collaborate with Youku and others it still shouldn’t get video on the cheap like this”
Most users see that 56.com is losing money, so a sell is inevitable. This seems more urgent than the fact that Renren has chosen to acquire the network.
On the Baidu forum dedicated to 56.com some users were wondering if the sale to Renren will mean tighter control of content on 56.
User EveningSilhouette said: “No wonder that I have been unable to upload videos these past couple of days. Of course new movies contain rights violations, but I can’t even upload old movies from decades ago. I cry, if this carries on then 56 will be behind Youku, where will I upload video to from now on?”