Xiaohongshu: the “Chinese Instagram” made its first profit


3 April 2024 - 17:00

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In 2023, Xiaohongshu generated revenues of $3.7 billion and a net profit of $500 million.

Xiaohongshu: the “Chinese Instagram” made its first profit

Some call it "the Chinese Instagram" due to its apparent similarity to the well-known platform owned by Mark Zuckerberg. In reality Xiaohongshu, also known as RED or Little Red Book has different characteristics. First of all, unlike Instagram, RED is a social commerce platform born in China as a community to share shopping experiences abroad.

Founded in 2013 by Miranda Qu and Charlwin Mao, this social media initially appeared as a sort of online tourist guide intended for local buyers, as well as a virtual arena in which they could review products and share shopping experiences. purchase with other users. However, Xiaohongshu would soon evolve into a complete platform, more oriented to the general public, where members could create and publish content regarding lifestyle, beauty, fashion, travel, and much more.

So, there is a small similarity with Instagram but it is only on the surface. RED merges the functions of classic social networks with e-commerce sites, allowing subscribers to discover, discuss, and purchase products in-app.

In 2014, a year after making its appearance, the company began to focus on connecting Chinese consumers and global retailers, thus creating its own cross-border online commerce platform.

The app has gradually gained popularity thanks to its user-generated content model and has become a significant player in China’s social commerce landscape, attracting millions of users and serving as a powerful tool for both big brands and influencers eager to attract clients.

The first profit for Xiaohongshu

The Financial Times wrote that in 2023, Xiaohongshu generated revenues of $3.7 billion and net profit of 500 million, marking its first profitable year. The previous year it totaled revenues of around $2 billion, incurring $200 million net losses.

The startup, valued at $20 billion in its latest funding round in 2021, continues to grow and is a rare success story in an industry recently battered by declining investor revenue foreigners. It has great supporters behind it - from Alibaba to Tencent, from GGV Capital to Sequoia China HongShan - and is increasingly popular among young Chinese.

In particular, Xiaohongshu is popular among young Chinese women, who flock to the platform for travel, beauty and lifestyle advice, but it is also appreciated by the male public having started to also focus on promoting content about cars, science fiction , and meme.

The service generates most of its revenue from advertising but has also developed its e-commerce feature, which influencers use to sell products through live streaming and short videos.

The recipe for success

Last year, Xiaohongshu reached the milestone of 312 million monthly active users, marking a 20% increase over the previous year and becoming the fastest-growing large social media platform in China in 2023.

Big brands have increased their marketing expenses on this social network precisely because the effectiveness of their advertising is higher than that of other platforms. RED has become an essential channel for brands that intend to target young users with purchasing power.

The FT noted that Xiaohongshu has a smaller user base than Douyin and Kuaishou, two well-known rival Chinese social networks, which have monthly active user bases of around 750 million respectively and 700 million. RED’s just over 300 million users, however, are concentrated in affluent cities, making this platform effective for those who aspire to target the most "elite" consumers.

Original article published on Money.it Italy 2024-04-17 07:10:00. Original title: Xiaohongshu: l’“Instagram cinese” ha realizzato il suo primo profitto

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