Xiaohongshu, once known as the "artifact of overseas shopping", has achieved remarkable results this year. According to multiple independent sources, Xiaohongshu has achieved large-scale profitability this year, with a net profit of $500 million, far exceeding the company's own expectations of $50 million at the beginning of the year. On this basis, Xiaohongshu plans to launch a Hong Kong IPO in the second half of next year, with a valuation of more than $20 billion.
Xiaohongshu's road to profitability has not been smooth. As a social e-commerce platform established in 2013, Xiaohongshu initially focused on sharing overseas shopping experiences and product reviews, attracting a large number of young consumers, especially female users. With the expansion of the user scale, Xiaohongshu gradually introduced business models such as self-operated e-commerce and advertising, and began to explore the road to profitability. However, Xiaohongshu has also encountered many challenges and difficulties, including the supervision of platform content, the quality and after-sales of products, and the compliance and credit of merchants. In 2019, Xiaohongshu was removed from the App Store and major Android app stores for allegedly publishing content in violation of regulations, resulting in user growth and revenue impact. In 2020, Xiaohongshu was seized by the Shanghai Municipal Taxation Bureau on suspicion of tax evasion, which aroused the attention of the society and the world.
In the face of these crises, Xiaohongshu did not give up, but actively adjusted and improved itself. Xiaohongshu has strengthened the review and management of platform content, standardized the behavior and responsibilities of platform merchants, optimized the user experience and service quality of the platform, and enhanced the brand image and reputation of the platform. At the same time, Xiaohongshu has also accelerated the commercialization process of the platform and launched more commercial products and services, including Xiaohongshu**, Xiaohongshu Live, Xiaohongshu Advertising, etc., providing more value and choices for merchants and users of the platform. According to Xiaohongshu, at present, Xiaohongshu has more than 1 monthly active users500 million, there are more than 100,000 registered merchants on the platform, more than 10 million types of goods on the platform, and more than 1 million content creators on the platform. Xiaohongshu has become a comprehensive platform integrating social networking, content, e-commerce, and advertising, covering beauty, clothing, food, travel, health and other fields.
Driven by both platform scale and business model, Xiaohongshu's revenue and profits have also achieved rapid growth. According to multiple independent sources, Xiaohongshu's revenue this year has exceeded $2 billion, of which e-commerce revenue accounts for more than 80%, advertising revenue accounts for more than 10%, and live streaming revenue accounts for more than 5%. Xiaohongshu's net profit this year reached $500 million, 10 times the company's own expectations at the beginning of the year, and it was also the first time that Xiaohongshu achieved large-scale profitability since its establishment. Xiaohongshu's profitability has been recognized and affirmed by the market, and Xiaohongshu's valuation has also risen. It is reported that Xiaohongshu completed a round of financing at the end of 2021, mainly based on the increase in holdings of old shareholders, with a post-investment valuation of more than $20 billion, more than double the previous round of financing.
On the basis of achieving large-scale profitability, Xiaohongshu plans to launch a Hong Kong IPO in the second half of next year to further expand its brand influence and market share. It is understood that Xiaohongshu has hired internationally renowned investment banks such as Goldman Sachs and Morgan Stanley as underwriters for its IPO, and is currently preparing for the IPO, including financial audits, legal counsel, investor roadshows, etc. Xiaohongshu's IPO is expected to be at least $500 million and may be adjusted based on market conditions. Xiaohongshu's IPO target is Hong Kong, which has a high level of recognition and acceptance of social e-commerce platforms, and the relatively low regulatory environment and policy risks in the Hong Kong market. Xiaohongshu hopes to use the Hong Kong IPO to enhance its internationalization level and competitiveness, and lay a solid foundation for future development.
Mao Wenchao, founder and CEO of Xiaohongshu, said in an interview that Xiaohongshu's vision is to become a social e-commerce platform that connects the world, providing users with the best quality content, goods and services, providing merchants with the most efficient traffic, conversion and growth, and providing content creators with the broadest stage, opportunities and income. He said that Xiaohongshu's IPO is just a milestone, not an end, Xiaohongshu still has a lot of potential and space, as well as many challenges and opportunities, and Xiaohongshu will continue to insist on innovation and change to create more value for users, merchants and content creators.