Meitu’s 2017 financial report showed a surge in revenue. The internet business segment achieved full-year gross profit and single quarter net profit. However, user activity, the most important core indicator of an app’s performance, has fallen sharply, which may be detrimental to its future development.
I. Revenue and profit
Meitu’s revenue rose 186.8 percent year-over-year, and its internet business grew 652.2 percent. It maintained much less deficits than before. The internet segment achieved a positive gross margin in 2017, and a net profit in Q4 2017.
This surge was mainly due to the large-scale commercialization of Meitu internet products. The proportion of internet revenues to all revenues rose from 6.6 percent to 17.4 percent. Its gross margin also rose sharply. In 2016, as the internet business had not yet started large-scale commercialization, the gross margin was -55.1 percent. In mid-2017, it was 15.2 percent, and at the end of 2017, the gross margin reached 23.1 percent.
To some extent, Meitu performed well in its commercialization of internet products.
Within the internet business income, advertising revenue rose 408.7 percent and value-added services revenue increased by 985.1 percent. If the advertising business had put more teams in Beijing and Shanghai and other areas closer to customers, and opened more information flow ads and non-standard advertising inventory, there may have been a larger increase in revenue. Meitu only gained 300 million yuan in advertising revenue, which is low compared to Toutiao and Weibo.
Revenue from value-added services comes from the rewards of live broadcasts and short videos and from prop income. Here, there is also large room for growth, especially in product innovation and paid packages. Inke, a purely live broadcast app, earned nearly four billion yuan in 2017, and has 20 to 25 million active monthly users. Meitu only earned 400 million yuan from live broadcasts. The number of Meitu paid subscribers has fallen in the last six months, from 325,000 to 314,000.
II. Users and activity
Meitu had a rather disappointing performance in this part.
In 2017, Meitu’s monthly active users (MAU) fell 7.6 percent. Meitu Xiuxiu rose 14.8 percent, but BeautyCam fell 23 percent, Meipai fell 13.8 percent, and others fell 4.4 percent.
Meipai was once regarded as the most promising short video community. The mid-2017 earnings report showed that its MAU was once as high as 152 million (32.8 million in-app users), up 33.3 percent from the end of 2016, which was 114 million. At the end of 2017, its MAU was only 98.13 million (29.5 million in-app users).
Xinhong Wu, the co-founder and CEO of Meitu, said in the earnings meeting that Meipai’s average daily video viewing volume per user increased from 52 to 63 videos. However, this may be simply because loyal users have more interest in the videos. After the loss of nearly 54 million monthly active users, the increase of the average daily video viewing volume per user does not prove that “Meipai has higher user stickiness.”
Meitu reported in February 2018 that the overall MAU returned to 2016 year end levels, or around 450 million. However, impacted by the rapid growth of Kuaishou and Douyin, it is hard for Meipai and other short video apps to develop smoothly.
From the overall number of Chinese internet users, there is neither growth nor dividends. As a result, a sudden outbreak of a particular application, such as live Q&A, short video or mobile games, is bound to result in the decline of another application.
For example, if one begins to watch live Q&As, one would have less time to watch TV. As one start to play mobile games, one would have less time to spend on live Q&A.
Competition is simple yet intense.
Yixia Technology has been developing Bobo Video, and Weibo has also begun to develop its own short video product. Miaopai now is in a dilemma.
The report showed that Meitu doubled its spending in research and development in 2017. It remains unclear whether Meitu could offer something new. After the so-called “technology upgrade”, Meipai may bring some new changes.
III. The way out?
The last point mentioned in the report is worthy of attention. “We are trying to transform Meitu Xiuxiu into a social platform for videos, so that users can share a colorful life and keep up with the latest trends and fashion. We plan to upgrade the app at the end of June this year.”
Does this strategy mean giving up on Meipai to try to make Meitu Xiuxiu a community, just like it has done before?
In mainland China, Meitu’s MAU declined 16.4 percent, but overseas MAU grew 29.5 percent. Overseas users account for 25 percent of all users.