Xiaohongshu, a Chinese social media and e-commerce platform often proclaimed as the Chinese version of Instagram, saw its first-quarter profit surge five fold year-on-year, driven by increased advertising revenue targeting female Generation Z consumers.
According to the finding by The Financial Times, citing data from two insiders, Xiaohongshu posted a net profit of USD 200 million in the first quarter, with revenue soaring 67% to USD 1 billion.
Xiaohongshu has not officially disclosed these earnings. Xiaohongshu has been eyeing a potential IPO in Hong Kong, although there have been conflicting reports. In August, rumors about an impending IPO resurfaced but were denied by sources close to the firm.
Founded in 2013, Xiaohongshu, directed translated as "Little Red Book", quickly became one of China’s fastest-growing social media platforms, especially popular among younger users, particularly women, for its lifestyle content, product reviews, and personal stories. Over time, the platform has shifted towards e-commerce, enabling users to purchase products directly through the app.
The platform’s monthly active users grew by 20% last year, reaching 312 million. The company also reported a net profit of USD 500 million on USD 3.7 billion in revenue, reflecting an 85% revenue increase. Advertising remains the company’s primary revenue driver, contributing around 80% in 2022, though this share has slightly decreased as the firm focuses more on e-commerce. While Xiaohongshu has not provided specific e-commerce revenue figures, it has frequently highlighted its growth in the sector.
E-commerce, particularly live-streaming, has been a key growth area for Xiaohongshu. Over the past 18 months, the number of users placing live-stream orders surged nearly tenfold, while collaborating brands increased over fivefold, according to the platform’s head of e-commerce operations in July.
Chief Marketing Officer Zhi Heng announced in September that Xiaohongshu would continue to support small and medium-sized businesses (SMBs). In the six months leading up to June 30, the number of SMB merchants on the platform grew 379%, with their gross merchandise value jumping 436%.
Despite these advancements, Xiaohongshu still faces challenges in competing with established e-commerce giants like Alibaba, JD.com, and Pinduoduo.
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