Zhihu's 2023 annual report: The stock price that can't rise, the AI that can't be grasped

While not making much money, Zhihu is also facing the problem of declining content quality. The once professional community ecology and content style are being smoothed out again and again in revisions, and are replaced by increasingly entertaining community hot lists and information flow pushes.

Author|Yang Zhichao

Edited by Wilderness

WeChat public account: slightly large reference (ID: hyzibenlun)

How much does it cost to affect the stock price of a listed company with a market value of 3 billion? 1 billion to 500 million?

It may only cost a few thousand dollars.

In February, the trading volume of Zhihu Hong Kong stocks ushered in a low point. On the 26th, a snowball investor discovered: "The trading volume of 400 shares in the whole morning, (this) is the moment when 5,000 yuan can affect the rise and fall of the stock price." ”

Entering March, Zhihu's trading volume is still not ideal. As of the close of trading on March 26, the trading volume of Zhihu Hong Kong stocks was only 12,100 shares: a market value of 3 billion, a daily trading volume of 130,000 Hong Kong dollars, and a turnover rate of less than 1/10,000.

In terms of stock price, Zhihu has continued to fall in 2023. As of the close of trading on March 26, the share price of Zhihu Hong Kong stocks has fallen from 36 yuan at the beginning of 2023 to 11.3 yuan. Dry trading volumes and depressed stock prices are all dangerous signs.

Zhihu's performance is not so bad.

According to the 2023 financial report, Zhihu's annual revenue increased by 16.5% year-on-year, and the loss continued to narrow. Among them, the loss in the fourth quarter decreased by more than 4% year-on-year, and the adjusted net loss was less than 100 million yuan for the first time. But it is also in 2023 that Zhihu's share price has fallen by about half.

Perhaps even more terrible than a loss is the lack of hope.

01 Slowing performance

Zhihu in 2023 has shown a trend of contraction.

For the whole of 2023, Zhihu's revenue will be 4.198 billion, a year-on-year increase of 16.5%, which is lower than the growth rate of the previous year.

From the perspective of income structure, the current commercialization of Zhihu has three troikas: advertising, paid membership income known as "story clubs", and vocational education.

Among them, the revenue of paid membership reached 1.826 billion yuan, a year-on-year increase of 48.4%, which has surpassed advertising and is the largest source of income for Zhihu. From the perspective of income, Zhihu has become a "novel website".

The income of vocational training also reached 565 million yuan, a year-on-year increase of 127.8%. Since 2021, Zhihu has continued to acquire vocational education companies, including the accounting training platform Quality Vocational Education, the study abroad training institution Lie Party Education, and the teacher examination platform "Let's Test Teachers". In addition, it has also launched its own adult education APP "Zhixuetang" and "Product Trainee". With the acquisition and the layout of its own online courses, the revenue of this part of the business has grown rapidly from scratch.

However, in terms of advertising revenue, the core of the content platform, Zhihu experienced negative growth, falling from 1.956 billion yuan to 1.653 billion yuan.

This is very inconsistent with the general environment of Internet advertising. The internet advertising market in 2023 is recovering. Tencent, Baidu, Kuaishou, Bilibili and other Internet companies have achieved good growth in advertising revenue. For example, Baidu's online marketing revenue increased by 8.06%, Kuaishou increased by 23%, and Bilibili increased by 27%.

In the case of the collective growth of peers, Zhihu's advertising revenue has declined. This only shows that the value of this platform is increasingly not recognized by advertisers.

The growth rate of membership subscriptions is also declining. Entering the fourth quarter, Zhihu's revenue growth slowed down, with the growth rate falling to 2.2%. The decline was mainly due to paid membership revenue, which increased by only 13.3%. As the main growth engine of Zhihu at present, the decline in paid membership is a negative signal for the overall growth of Zhihu.

However, Zhihu's losses in the fourth quarter are also narrowing. The net loss in the fourth quarter narrowed by 42.6% year-on-year, and the adjusted net loss was 91 million yuan, a decrease of 31.9%, which was the first time since the listing that the adjusted net loss was less than 100 million yuan. The net loss for the year was 839 million yuan, a year-on-year decrease of 46.8%.

At present, it seems that Zhihu is one step closer to breaking even. This is due to the fact that throughout 2023, Zhihu's investment has shown a certain contraction trend, and general and administrative expenses have decreased by 26%. Marketing expenses only increased by 18.4 million yuan, and R&D expenses only increased by 20.1 million yuan, and the growth rate was smaller than the revenue growth rate.

The contraction has greatly reduced the losses of Zhihu, but it also means that the likelihood has decreased.

02 Dry up trading

Theoretically, Zhihu can buy himself twice.

As of December 31, 2023, the total liquid assets reached $900 million, but the market capitalization was only $427 million. As the "first stock of dual primary listing", Zhihu has returned to Hong Kong stocks for more than a year, and its share price has also fallen for a year. The current market capitalization is only half of what it was when it landed on the Hong Kong stock market at the end of 2022, and less than a third of the stock price peak in February last year.

Along with the market capitalization, there is also Zhihu's trading volume.

In February this year, Zhihu's Hong Kong stock price fell into a trading slump. On the Xueqiu community, some shareholders said: "No trading in the morning?"

The drying up of trading volume is not all to blame for itself, and the trading volume of Hong Kong-listed Internet companies such as Weibo and BOSS Zhipin is also not ideal. This has something to do with the big picture. But in the U.S. stock market, Zhihu's trading popularity is a little "unique". Taking March 25, the day before the release of the earnings report, as an example, at the close of the day, the trading volume of Zhihu was 1.3521 million shares, and the turnover rate was only 0.23%.

——Not compared with top stocks such as Tesla, or compared with Douyu, where executives and anchors have been imprisoned one after another, Zhihu's trading activity is also low. On March 25, Douyu's U.S. stock turnover rate reached 0.47%. It is worth mentioning that Douyu announced a stock merger not long ago, and Zhihu, which fell to $0.7, is also very likely to make the same choice.

Behind the continuous decline in Zhihu's stock price is a loss and a slowdown in revenue growth. But at the end of the day, there's no hope.

Until today in 2024, Zhihu still has not found its own strong cash cow, and still relies on traditional monetization methods such as advertising. And the growth of users has also come to an end: as of the fourth quarter of 2023, Zhihu's monthly active users have fallen to 99 million from 101 million in the same period last year.

Although the revenue of membership subscriptions continues to grow, the business is not in line with Zhihu's professional and serious community ecology, and the frequent exposure of various "story meetings" will also destroy Zhihu's original content ecology. And, as the number of users peaks, this revenue may also reach a ceiling. Although vocational education is on the cusp, the income it generates is still limited.

While not making much money, Zhihu is also facing the problem of declining content quality. The once professional community ecology and content style are being smoothed out again and again in revisions, and are replaced by increasingly entertaining community hot lists and information flow pushes.

But fortunately, God also left a window for Zhihu: AI.

03 AI that can't be rubbed up

A few days before the release of Zhihu's annual report, an AI product detonated the market: Kimi.

The large-scale model app, launched by AI startup Dark Side of the Moon, announced on March 18 that it would support 2 million words of long text input. The breakthrough made Kimi quickly popular, and it also ranked among the top three mobile app downloads in China.

Around March 20, a large number of Kimi concept stocks soared, and various companies that did not seem to be closely related to Kimi rose one after another, such as the online literature company Palm Reading Technology, the second largest shareholder of Station A, Chinese Online, and the program production company Zhongguang Tianxue.

But Zhihu did not get this wave of heat, and at the close of trading on March 20, Zhihu's Hong Kong stock price fell slightly by 1.2%.

It's a bit strange, after all, Zhihu is actually a "Kimi concept stock". A large amount of content in Kimi comes from Zhihu, that is, the Zhihu platform is one of the main sources of training corpus for Kimi.

Not only did Kimi not get the popularity of Zhihu this time, but throughout 2023, Zhihu's stock price did not get too much light from AI. At the beginning of 2023, ChatGPT became popular in the capital market, and related concept stocks rose sharply. Zhihu also rose by 51.4% at one point, and with the east wind of GPT, Zhihu also hit a record high in stock price. After all, Zhihu has huge content resources, which is an excellent training material for large models.

But since then, the large model seems to have been decoupled from Zhihu. Even if Zhihu launched its own large model "Zhihaitu AI" in April, it only made Zhihu's stock price rise for a short time.

On March 20, Zhihu released the "Discovery · AI Search" function. The function is somewhat similar to ChatGPT, where users can search through AI in the page to get generative answers, and can also retrieve the content of the Zhihu platform itself. However, the launch of this feature has not led to a sharp increase in the stock price.

In fact, the value of Zhihu in the field of AI has a target object: Reddit in the United States.

Content is an extremely valuable resource for training large models that determine how intelligent they are. Not long ago, Google also reached a partnership with Reddit to buy Reddit's data as a training resource for up to $60 million a year - this kind of real income will effectively boost the value of Zhihu if it can fall on Zhihu.

Reddit also has a very high market cap. On March 21, Reddit went public at a valuation of $5 billion, and its stock price has continued to rise since the listing, reaching $9.5 billion.

Reddit's performance in commercialization is also very poor, with only $800 million in revenue in 2023 and a long-term loss. Being able to obtain such a high valuation is, of course, inseparable from the value of its content in the AI era.

This may bring hope to Zhihu at the moment. Zhihu, whose annual revenue is only more than $200 million less than Reddit's, has a market capitalization of less than one-twentieth of Reddit's. At a time when revenue growth has slowed down, Zhihu's breakthrough may only rely on the story of AI.