By now you’ve probably heard that Luo Chuan, the former head of MSN China who was hired to run MySpace.cn, plans to resign his position as the company’s CEO and is likely to make some kind of an announcement soon. The rumor of his pending resignation has been circulating since the end of August, originating with an anonymous, putative MySpace insider’s comments to Sina.com, citing strategic directional differences with the board. The rumor appears to have been confirmed, according to Eric Eldon of Venture Beat, who says he has a source in China, but I personally have no further direct knowledge of the situation.

A couple of disclosures up front: WPP, Ogilvy’s parent compay, is an LP in China Broadband Capital, one of the venture backers in MySpace. And I’m an advisor to Friendster, which is a competitor to MySpace though clearly without quite the ambitions that MySpace has for the China market.

While it’s never been the runaway success that it was in its home market, MySpace’s venture into China appeared initially to have gotten some things right. From the time the venture was first announced, a great deal of emphasis was placed on the idea that the local management team was to be given considerable autonomy and decision-making authority, the lack of which is generally recognized to be lethal to Western Internet companies trying to make a go of it in China. It wasn’t going to be hobbled by a long decision cycle that involved reporting back to the U.S. And with IDG as one of its backers — a VC which has one of the most more-local-than-thou investment philosophies I’ve ever come across in China, I was quite convinced that it would be given berth to get as local as it had to get to compete successfully.

What I’m hearing, oddly, is that Luo’s differences with the board put them on different sides of the localization issue, with Luo not wanting to go as local perhaps as the board had in mind. Perhaps believing that “local” equals “low-brow,” it’s possible they were influenced by the comparisons so often made between Facebook and MySpace in the U.S., where the former is more Obama, the latter more Palin. I suppose they may have wated MySpace.cn to be more 51.com, while perhaps Mr. Luo was looking to be more like the site Kaixin001.com is shaping up to be, attracting a more educated, urbane crowd.

I don’t believe it will be easy to find someone to fill Luo’s shoes, and I certainly don’t envy anyone who ends up leading the effort. The SNS field has gotten quite crowded; Xiaonei, its war chest flush with cash after Softbank Corp’s investment in Xiaonei’s parent Oak Pacific, has a market share lead both in time spent on site and in monthly unique visitors, as I recently wrote, though 51.com (also well-funded now, having raised about $50 million from online game company Giant Interactive in June), is coming on strong. And rumor has it that Kaixin001, which as I’ve mentioned is the hottest new SNS on the scene, just raised an eyebrow-raising $25 Series A round led by Northern Light. I remind you that this is still only rumor; anyone with further information, please let me know. (SEE UPDATE BELOW: the $25 million number’s apparently a huge exaggeration).

Xiaonei has a solid and, I would imagine, rather unshakeable grip now on campus-focused SNS. The company has sought to expand to the “white collar worker” crowd, and it’s clear they’ve made some headway there. 51.com, massively popular in the hinterland and in lower-tier cities of the coastal provinces, has very little competition in the demographic niche — hardly a niche, really — that it’s defined for itself, and the tie-up with online games will likely only strengthen it. Now, Kaixin001 has really seized the initiative with white collar office worker types in upper-tier cities, pushing out social games selected from tried-and-true Facebook apps. (I’m hearing that within just a couple of months, they’re already at half of Xiaonei’s traffic). Where does MySpace.com fit in?

When I spoke with Luo Chuan early on after the launch of MySpace.cn, I asked him quite candidly what the site’s core selling point was intended to be. There really isn’t enough of an indie music scene in China, I opined, to drive MySpace the way I believed had happened in the U.S. He told me that I was actually mistaken about the role that indie rock had played in the rise of MySpace, and that music actually accounted for very little of the interest in and usership of the site. I’m not sure I ever really did come to understand where MySpace.cn hoped to fit in the market. I just didn’t see it sufficiently differentiated, and despite its high-profile agreement MSN, I never saw it reach that critical mass.

According to iResearch, MySpace.cn ranked 3rd in June with 10.7 million unique visitors — certainly nothing to sneeze at! — but was a distant fourth in share by time spent, lagging Xiaonei, 51, and dating site Jiayuan with only 2.69% market share by time. I don’t believe it’s a hopeless cause at all. But finding the right leader and, equally importantly, really coming up with a compelling identity — those won’t be easy challenges at all.

UPDATE: A friend with close ties to the VC world says that Kaixin001 got nothing close to $25 million. That’s the thing about rumors: Sometimes they’re just plain wrong. Will let you know when I find out more about that deal.