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Title: The Business Challenges of Waterdrop: Traffic, Capital, and Human Dilemmas
Waterdrop, once considered the "first insurtech stock," now faces a series of business challenges that require a re-examination of its business model. This article will delve into Waterdrop's problems, while adding some independent perspectives and analysis.
Traffic traps
In the early days, the company quickly accumulated a huge amount of traffic on the user side with the water drop chip platform, but this was not enough to support a commercial organization. Waterdrop's core business is Waterdrop, an internet insurance platform that cooperates with more than 60 insurance companies to provide various insurance products.
The original business logic was that the water drop chip and the water drop mutual aid attracted users through traffic, and then guided them to buy water drop insurance to achieve profits. However, over time, the flow contribution of water drop chips and water drop mutual aid gradually weakened, especially in 2021, when the water drop mutual aid business was closed. Waterdrop had to turn to third-party traffic channels and pay high sales and marketing expenses to sustain business growth.
While this strategy seems to work in the short term, the 2021 earnings report shows that the company's marginal benefits are gradually weakening, and the flow/return ratio has reached a ceiling. This has made it necessary for Waterdrop to rethink how to achieve sustained profitability in the field of internet insurance.
Distrust in capital markets
Waterdrop's share price fell sharply for a time, reflecting the capital market's distrust of it. After frenzied sales and marketing expenses, the company began to tighten spending in pursuit of profitability. Despite two consecutive quarters of earnings, the stock price still hasn't rebounded.
Distrust in capital markets stems in part from concerns about the future of the internet insurance industry. The growth rate of internet insurance has slowed down, penetration is still limited, and many companies are trying to cope with this challenge through online + offline integration. Waterdrop companies are also exploring this space, but face uncertainty as business models and regulation are still evolving.
In addition, Waterdrop failed to find an engine of growth other than insurance. Although companies have tried to launch new businesses such as "Waterdrop Good Medicine" and "Waterdrop Health", their contribution has been relatively limited. Waterdrop still relies mainly on the insurance business for revenue, and losses in this area are increasing year by year.
The dilemma of the human character
Waterdrop is caught between business and philanthropy. Although it is a commercial company, it is widely regarded as a charity by the public, which makes its business practices questionable. The company has emphasized the "charitable" nature of its business in the past, such as claiming that Waterdrop "does not charge any service fees."
However, some incidents revealed Waterdrop's negligence in reviewing fundraising applications, which further damaged its reputation. Waterdrop companies have had to face the question of how to raise the bar for scrutiny if it is economically viable, but that can increase costs, especially for companies that are already losing a lot of money.
In addition, the company's new business accounts for a relatively small proportion of total revenue and has a limited contribution. Waterdrop needs to rethink how it balances business and philanthropic imagery to gain the trust of the public and investors.
summary
Waterdrop faces multiple challenges such as flow, capital and personality, and needs to re-examine its business model. In the field of internet insurance, companies need to find new growth points and improve profitability. At the same time, companies must balance their commercial and philanthropic image to rebuild their reputation. The "old drivers" of this Internet age need to re-plan the road to cope with the changing market environment.
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