Giant Interactive Group Inc announced to that it would purchase a 25 percent stake in 51.com, the popular Chinese based social networking for $51 million dollars. How did they come up with a valuation? Not quite sure but the $51 million appears to be a symbolic number. This values 51.com at just over $200 million, a far cry from the $3-$4 billion that Facebook is estimated to be valued at currently.
Giant Interactive is a publicly based gaming company which has been struggling to acquire new users. This new acquisition will help boost their position and get them access to new online game users. Other investors in 51.com currently include Intel Capital, Sequoia Capital China, SIG and Redpoint Ventures. 51.com currently has over 120 million users compared to Facebook’s 70 million users.
This illustrates how large of an opportunity currently exists in China. The battle to become the dominant social network in China has been heating up. Less than two months ago, 51.com obtained another $50 million round of funding. Xianoei, a Facebook copycat raised a whopping $430 million back in May. 51.com’s low valuation may be based on their $44 million cash flow which Eric Eldon wrote about back in May.
With Facebook’s recent launch in China, it will be interesting to see how the social network landscape changes over the coming months. The large social networks are clearly stacking up their war chests positioning the market for an epic social networking battle abroad.