Recently, Xiaohongshu held the 2024 WILL Business Conference in Shanghai.
Subsequently, the news about Xiaohongshu's imminent listing also spread, according to the IPO news on December 25, Xiaohongshu may be listed in Hong Kong in the second half of 2024 at the earliest. In response to the above news, Xiaohongshu told the financial reporter of Rongzhong that the company currently has no plans to go public.
And this is not the first time that Xiaohongshu has been announced, and Xiaohongshu needs to face up to how the current changes in the investment environment can support its high valuation.
In terms of business, Xiaohongshu continues to explore its commercialization path, undergoes many adjustments, and continues to emphasize the importance of community while focusing on interest e-commerce in 2023. Xiaohongshu COO Conan has publicly stated that community and business are not opposites, nor are they contradictory.
Industry insiders said that at present, there are still many problems to be solved in Xiaohongshu's live broadcast e-commerce, and its competitors are strong, and it still needs to build a complete platform operation mechanism, and it is still difficult to completely replicate Dong Jie's live broadcast effect.
Waiting to go public?According to the official website, Xiaohongshu was founded in Shanghai in 2013 by Mao Wenchao and Qu Fang. According to Tianyancha information, up to now, Xiaohongshu has completed 6 rounds of financing, with a cumulative financing amount of more than 900 million US dollars.
The last round of funding was in 2021, with investors including Temasek, Tencent, Alibaba, Tiantu Investment, and Yuansheng Capital, and after this round of investment, Xiaohongshu's valuation rose to $20 billion. In the previous financing process, the financial reporter found that the company's investors also include well-known companies and institutions such as Zhen ** and GSR Venture Capital, and Tencent has invested in 3 rounds in a row.
Regarding the news of the IPO, according to Jiemian News, founder Qu Fang told Bloomberg in April 2018 that it is possible to complete the IPO in the next 2-3 years. Five years have passed since then, and Xiaohongshu still has not clarified the specific time point for listing.
However, there have been many rumors that Xiaohongshu is about to go public. In March 2021, Bloomberg reported that Yang Ruo, the former managing director of Citi TMT's investment banking division in Asia Pacific, would join Xiaohongshu, which was considering going public in the United States as early as this year.
Yang Ruo has extensive experience in the financial field, and this appointment is also seen by the outside world as Xiaohongshu's preparation for listing. At that time, Xiaohongshu confirmed the news that Yang Ruo joined Xiaohongshu as CFO, but said that the company had no IPO plan for the time being.
A month later, Xiaohongshu was rumored to be listed again: Reuters' **IFR reported that Xiaohongshu planned to IPO in the United States around the middle of that year, raising about $500 million to $1 billion. But after that, there was no news about Xiaohongshu's listing, and Yang Ruo also left in September 2022.
Shen Meng, executive director of Xiangsong Capital, believes that for Xiaohongshu, there will be the possibility of listing and refinancing, but at present, the possibility of its listing on the A-share market is not very large.
Therefore, for Xiaohongshu, unless there are individual shareholders who have an urgent need to exit, and at the same time, it is difficult to find an investor who can be willing to take over its equity with a suitable **, Xiaohongshu may urgently seek to go public. Shen Meng said.
Notably, the market's valuation of Xiaohongshu has shrunk significantly over the past two years, with private equity data provider Altive stating that the implied valuation of Xiaohongshu from private market fundraising that began earlier this year ranged from $10 billion to $16 billion.
According to The Times, sources revealed that one of Xiaohongshu's major investors had sought a $14 billion valuation** stake in October 2022.
Regarding the reasons for the shrinkage of Xiaohongshu's valuation, Shen Meng told Rongzhong Financial Reporter that the overall market has readjusted the value judgment of Xiaohongshu.
Shen Meng said, "Now the market environment has changed, at present, Xiaohongshu does not have the previous high valuation in the secondary market, from its concept and revenue aspects, investors' interest in related sectors has changed significantly, so there will be this valuation downgrade." ”
Balance the game of the community.
According to its official website, Xiaohongshu positions itself as a lifestyle platform for young people, and users can record their lives in the form of short **.
When it comes to Xiaohongshu, we can't help but mention Instagram, a social app that was launched on the App Store in 2010 and is based on content sharing. According to public information, Instagram had 100,000 registered users in just one week after it was launched, and then users quickly covered more than 50 countries and established more than 700 online communities$1.5 billion acquisition.
The fast-growing Instagram has allowed domestic Internet companies to find a learning object, and the platform is also considered by the industry to be the benchmark object of Xiaohongshu, and the equal content recommendation mechanism has allowed high-quality content to get more opportunities, thus forming a positive interaction between KOLs and users.
It is generally believed that unlike Zhihu, "Doukuai", Weibo, etc., Xiaohongshu, which started with the community, had obvious labels such as "feminine" and "petty bourgeoisie" at first. With the rise of "interest e-commerce", Xiaohongshu has attracted much attention from the market.
According to information on its official website, in June 2017, the number of Xiaohongshu users exceeded 100 million. As of October 2019, Xiaohongshu has more than 100 million monthly active users, 70% of whom are post-90s, and continues to grow rapidly.
But at the same time, Xiaohongshu has also encountered the same commercialization problem as Instagram for a long time - how to monetize, and has fallen into the game of various commercialization paths and community balance.
At the same time, problems such as "false grass planting" continue to be exposed, and Xiaohongshu's ability to commercialize the community has been questioned by the outside world. At the other end, its e-commerce business has been affected by the low-price strategy of the leading e-commerce platform.
At this point, Xiaohongshu is faced with a decisive path choice, and there is a view that the company's founders have previously vacillated between content community and commercialization. Among them, the development focus of Xiaohongshu has also undergone a process of "deviating from the community and returning to the community".
According to a report by LastPost, in order to ensure a community atmosphere, Xiaohongshu has always restrained commercialization. According to the report, in 2019, community leader Ding Ling (nickname: Conan) led a small team of three people to form an advertising business. Bobbie Brown, a makeup brand from New York, became Red's first advertiser.
However, the growth rate of the Internet advertising industry has slowed down in the past few years, and according to Huachuang**'s analysis, the growth rate of the Internet advertising industry in 2022 is expected to end at 61%, the lowest growth rate in the past five years.
In terms of business composition, according to the "2021 Xiaohongshu Brand Research Report" released by the Toubao Research Institute, Xiaohongshu's revenue in 2021 is mainly composed of advertising and e-commerce, accounting for 80% and 20% respectively, and the revenue of the e-commerce business has not yet achieved large-scale growth.
As for the current profitability of Xiaohongshu, Xiaohongshu has not officially announced it. However, according to the recent 21st Century Business Herald, citing foreign media reports, Xiaohongshu may achieve a net profit of about 500 million US dollars this year, much higher than the company's own expected net profit of 50 million US dollars at the beginning of this year.
The actual profit figures are unknown, and it is still unknown whether the business growth will be affected by the unexpected popularity of its buy-in e-commerce model.
Make efforts to buy e-commerce.
Today, Xiaohongshu has crossed its 10th anniversary, and looking back on the past ten years of growth, Xiaohongshu has been constantly exploring its own unique e-commerce business model. As early as 2014, Xiaohongshu launched the "Welfare Society" to start a cross-border self-operated e-commerce business.
Although Xiaohongshu e-commerce has transactions, what is the difference between it and other platforms?Obviously, Xiaohongshu has thought deeply about this from the very beginning. Xiaohongshu continues to launch a variety of differentiated products, and has gone through many trials and errors.
In March 2018, Xiaohongshu launched its own brand Youguang Redelight, which has a similar model to NetEase Yanxuan. At the beginning of 2022, Xiaohongshu also launched its self-operated e-commerce project "Little Oasis", which initially focused on comprehensive categories such as beauty, skin care products, fragrance, and fashion home furnishingsSoon after, as the topic of outdoor camping continued to be hot, the platform immediately changed its positioning and turned to deep camping, land chong, skiing, cycling, hiking and other sports scenes.
Zhang Shule, an industry leader, told the financial reporter of Rongzhong that Xiaohongshu has always wanted to do a closed loop of e-commerce before, but in this process, although it understands how to link "goods" and "fields", "goods" and "fields" cannot be linked with "people", and "people" include consumers and content creators.
On the one hand, for a long time before, consumers would choose 'goods' on the Xiaohongshu platform, but they would choose other platforms when buying, so this cut the chain between 'people' and 'fields';On the other hand, the content created by creators sometimes does not have 'goods' in Xiaohongshu. Zhang Shule said.
Regarding the layout of its live broadcast and e-commerce business, Xiaohongshu has made several organizational adjustments this year. In March this year, latepost reported that Xiaohongshu will upgrade the live broadcast business to an independent department, and unify the management of live broadcast content and live broadcast e-commerce and other businessesIn August, Xiaohongshu integrated its e-commerce business with its live streaming business and established a new trading department, which became a first-level department parallel to the Ministry of Community and the Ministry of Commerce, which was previously a second-level department under the Ministry of Community.
Subsequently, Xiaohongshu also shut down some e-commerce-related businesses. In September 2023, "Little Oasis" issued a farewell letter to users, saying that due to business adjustments, the platform ceased operations on October 1, and the sale of goods was stopped, and it was officially closed on October 31. That's just over a year since it went live. Regarding the reason for the closure, the farewell letter said that in the process of business exploration and development, the expected goal of maximizing everyone's outdoor needs was not achieved.
Soon after, Xiaohongshu's "Welfare Society" issued a letter to users, saying that the "Welfare Society" would also stop selling goods on October 16, and officially close its stores on the 16th of the following month, and the "Welfare Society" did not celebrate its 10th anniversary after all.
In this regard, Zhang Shule analyzed that unlike before, Xiaohongshu has basically explored the chain of "goods" and "fields", that is, "goods" and "fields" are becoming more and more abundant, but this is also what other platforms can do. Because of the unexpected popularity of Xiaohongshu's head anchors such as Zhang Xiaohui and Dong Jie, Xiaohongshu has been guided to a new model, that is, how to use word-of-mouth to bring products, such products are not necessarily the lowest price on the whole network, but they can also meet the needs of users. ”
In this way, Xiaohongshu's e-commerce closed-loop chain has basically taken shape, and it is currently making efforts to buy e-commerce, and the previous closure of two platforms ('Little Oasis' and 'Welfare Society') is also to concentrate on the layout of the existing model, Xiaohongshu is more still to incubate ordinary creators, especially creators who have risen on the platform. Zhang Shule said.
Xiaohongshu also mentioned in the letter to users released by Xiaohongshu "Welfare Society" that in order to better meet the needs of rapidly growing users, Xiaohongshu will concentrate resources and strength to serve the development of more buyers, managers, merchants and brands on e-commerce platforms.
In January this year, Dong Jie made her live broadcast debut on Xiaohongshu, and related platforms estimated that her GMV exceeded 50 million. Subsequently, the "first generation of celebrity" Zhang Xiaohui also became famous in Xiaohongshu, with the first live broadcast lasting nearly 6 hours, with a popularity of more than 600 million yuan and sales of more than 50 million yuan.
Xiaohongshu is constantly aware of the importance of buyers to the platform. In August this year, at the Xiaohongshu Link E-commerce Partner Week's "The Buyer's Era Has Come" theme talk, Xiaohongshu COO Conan delivered a keynote speech saying that Xiaohongshu buyers, managers and other individuals have become key players in Xiaohongshu e-commerce, and they are the connectors between goods and users.
At the same time, Xiaohongshu has increased its traffic support for buyers, and Yinshi, the head of the live broadcast, and Mai Queen, the head of the e-commerce business, have also said that they will invest 50 billion traffic to support the growth of more Xiaohongshu buyers, and at the same time invest 50 billion traffic to support merchants.
Buyer e-commerce opportunities and challenges coexist.
Since the beginning of this year, in addition to Dong Jie and Zhang Xiaohui, Yi Nengjing, Yang Rong, Dong Xuan and other stars have opened the mode of bringing goods on the Xiaohongshu platform.
According to the data, from August to Double 11, in just three months, Xiaohongshu has incubated 2 100 million buyers, 21 10 million buyers and 20 million buyers.
This year's Double 11, the operation model of buyer e-commerce also helped Xiaohongshu release the first Double 11 report, data shows that during the period, the number of Xiaohongshu e-commerce purchase users was 33 times, the number of orders is 38 times;The number of merchants participating in Xiaohongshu's Double 11 this year is 41 times, the GMV of the store's live broadcast has reached 69 times, the number of buyers on the air is 33 times, the live GMV of buyers is 35 times, buyers are becoming more and more Xiaohongshu merchants.
It is worth noting that Dong Jie and Zhang Xiaohui's live broadcast room exceeded 100 million GMVs in a single game.
According to the analysis of iResearch's report, interest e-commerce has a multi-transaction layout and an overall growth rate, and it is expected to obtain high sales through comprehensive e-commerce contact points. Consumers stay in the platform for a long time, consume a large amount of content, have a higher degree of acceptance of native commercial content, and have a better effect on lead collection and transaction conversion.
On the other hand, Zhang Shule said that Xiaohongshu's community users themselves have a desire to buy, and Xiaohongshu tries to unify "planting grass" with official channels, so that "planting grass" and "pulling weeds" form a closed loop within the platform, which is the biggest advantage of Xiaohongshu compared with other platforms.
The challenges faced by live streaming are even greater, first of all, the problem of competition. According to the "2023 (First) China Live E-commerce Market Data Report" released by the E-commerce Research Center of the Network Economic Society and the Live E-commerce Working Committee of the China Federation of Commerce, the current popular live broadcast e-commerce platforms include Douyin, Kuaishou, **Live, **Live, Jingdong Live, Duoduo Live, Vipshop Live, Station B, Mushroom Street, etc. The wolves are fed, and it is still a little difficult for Xiaohongshu to stand out from the encirclement.
Zhuang Shuai, a special researcher at the E-commerce Research Center of the Network Economic Society and the founder of Bailian Consulting, once said that there are still many problems in front of Xiaohongshu's live broadcast e-commerce, one is to face strong competitors such as Taodou Kuai and **, and the other is to build a set of platform operation mechanisms with thresholds. Judging from Dong Jie's live broadcast effect, it is still a little difficult to completely replicate, because whether it is the content or the ** chain, or the sales method of the anchor, it has its uniqueness.
The ecology of Xiaohongshu's buyer e-commerce is still in an initial stage, Zhang Shule said, this may be manifested in the fact that the products that "grow grass" are not necessarily in the channels and product catalogs provided by Xiaohongshu, and users cannot pull weeds on the platform.
At present, Xiaohongshu is also promoting the role model power of head anchors such as Dong Jie and Zhang Xiaohui, because celebrities have encountered a great dilemma before, and at the same time provide solutions for ordinary content creators. At present, live broadcast e-commerce and community e-commerce have come to this point, in fact, they have returned to the category of word-of-mouth marketing. Zhang Shule said.
At the same time, iResearch believes that interest e-commerce platforms need time to cultivate consumer habits, guide more categories to enter the platform, and establish supporting teams, services and logistics, with a long cold start cycle.