It is said that knowledge is worth more than gold. That maxim will be put to the test as China’s question-and-answer app Zhihu readies to go public in New York.
The IPO from the knowledge-sharing platform is expected to raise about $1 billion, Chinese media has reported. A pre-IPO fundraising in 2019 led by Baidu, Tencent and Kuaishou valued Zhihu at $3.5 billion but the listing is set to inflate the company’s value – even though it has been lossmaking since its inception in 2010.
Zhihu was founded by Zhou Yuan, a former journalist. The 41 year-old’s first entrepreneurial foray was a question-and-answer platform which served iPhone users in China. Inspired by the early success of Quora, which was founded in 2009 by former Facebook chief technology officer Adam D’Angelo, Zhou then opted to create a broader knowledge-sharing app.
Zhihu started out as an invitation-only platform. Its earliest users were mostly entrepreneurs and internet industry insiders, including Tencent’s boss Pony Ma and Meituan CEO Wang Xing. The forum came into existence around the same time as Sina Weibo (launched in 2009) and WeChat (2010). But the question-and-answer site tried to set itself apart from other social media platforms by offering a more high-minded service. Its users came up with esoteric questions and enjoyed offering more detailed and insightful answers. More importantly, they did so in a way that prioritised sharing their knowledge regardless of the financial returns – compared to some of the other rival platforms there was no way of receiving remuneration.
Within two years Zhihu had grown its active user base to nearly 400,000 people as it became a hotspot in China’s emerging ‘knowledge economy’ (see WiC396). But the question for Zhou was how Zhihu could become profitable. He realised that it could not afford to remain a vanity app for the elites and it went more mainstream, opening its platform to everyone in 2013.
The result was a huge spike in users and traffic. By the end of last year, Zhihu had about 70 million monthly active users who have contributed more than 315 million questions and answers (Quora had about 108 million answers by 2019).
However, the switch in strategy turned Zhihu from a cultish platform cherished by professionals and academics into a more mainstream proposition. More intellectual content was winnowed out by an influx of less insightful commentary. News portal Jiemian adds that the platform took on a much more “commercialised” look, following an expansion into new fields such as online education, video-streaming and advertising. The site has grown into a content platform where people can keep diaries, write fiction and act as social media influencers, notes Protocol, a Chinese tech watcher.
Zhihu has, however, established an unrivalled position in its core question-and-answer service. A rival forum operated by Bytedance called it quits earlier this year, when it was restructured into the company’s news aggregator app Toutiao. That led to some of Zhihu’s diehard fans celebrating it as a unique asset in China’s internet ecosystem. “If Kuaishou folded tomorrow, people could switch to Douyin. If Zhihu did the same there is no alternative available,” one long-time user told 36Kr.com.
Yet the bid to monetise its customers more effectively will draw Zhihu into direct competition with more experienced rivals. Zhihu‘s monthly active traffic is also dwarfed by the more than 500 million users of Weibo and over 200 million at BiliBili, Protocol points out. And while revenues more than doubled year-on-year to Rmb1.3 billion in 2020, its sales rank among the lowest of the leading Chinese internet firms. The company is still lossmaking too, although net losses were down to Rmb518 million ($79.73 million), compared with peak red ink of Rmb1 billion a year prior. Finding a way to make sustainable profit is the big question for Zhihu’s management.
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