China’s Renren Inc (RENN) Is No Facebook Inc (FB)

There’s apparently more than a few differences between social networking in China and how it’s playing out in the rest of the world.

Shares of Renren Inc (NYSE:RENN) opened 4% lower this morning — turning higher later in the day — after capping off a strong quarter with a weak near-term outlook.

Revenue rose 49% to $48.8 million during the fourth quarter for China’s leading social networking website operator. Renren Inc (NYSE:RENN)’s adjusted deficit checked in at $0.06 a share. Analysts were braced for a loss of $0.07 a share on just $46.4 million in revenue.

However, digging deeper into the performance shows how different Renren Inc (NYSE:RENN) is from Facebook Inc (NASDAQ:FB).

It’s not just that Facebook is profitable and Renren Inc (NYSE:RENN) is not. As mobile usage grows for both companies — mobile is accounting for two-thirds of Renren’s connections these days — Facebook Inc (NASDAQ:FB) hasn’t had a problem monetizing the platform on the smaller devices. Renren has struggled, and instead of traditional brand advertising, the Chinese speedster is turning to gaming and social e-commerce to cash in on the mobility trend. The end result is pretty shocking. Brand advertising revenue — something that’s up sharply at Facebook — actually declined 17% at Renren Inc (NYSE:RENN) over the past year.

Renren’s revenue was up sharply largely on a 117% spike in online game revenue. Gaming now accounts for more than half of Renren’s revenue, and that’s a sharp contrast to Facebook where casual games are becoming less of a factor as it beefs up its platform for marketers.

There’s a price to be paid when you’re a social networking site diversifying your revenue streams away from your high-margin roots. Cost of revenue far outpaced revenue growth itself — 84% vs. 49% — as Renren Inc (NYSE:RENN) invests in its Groupon Inc (NASDAQ:GRPN)-like Nuomi social commerce platform and its 56.com video-sharing hub. Facebook Inc (NASDAQ:FB) abandoned its foray into daily deals before it even went public, choosing instead to be a gateway for third-party merchants now via Facebook Gifts.

The market didn’t like Renren Inc (NYSE:RENN)’s outlook, forecasting $44 million to $46 million in revenue for the current quarter. That’s less than the $47.3 million that Wall Street was targeting and a 6% to 10% sequential decline from the fourth quarter’s top line showing.

Analysts simply blew it this time. Nearly every single Chinese dot-com that has already reported has warned of a sequential dip during the first quarter. It’s a seasonal thing, and the late start to the Chinese New Year is making things worse.