"Investor Network" Hou Shuqing

Editor Wu Yue

A few days ago, Zhihu Inc. was exposed to embed a "blind watermark" in the user screenshot of APP and web page, and did not take the initiative to inform the user. Some netizens found that Zhihu Inc. 's blind watermark may contain the user's UID (user identification) information. In early 2022, Douban was also exposed to embed a blind watermark in the page. Zhihu Inc. responded that the feature had been offline after a short period of testing.

Zhihu Inc. 's financial report for the second quarter of 2022 shows that the company is in a state of increasing revenue without increasing profits, with revenue of 826 million yuan, up 31% from the same period last year, but a net loss of 444 million yuan, an increase of 122% over the same period last year. Share prices are nearly 90% lower than they were when they landed in march 2021. Today, the original shareholders such as Capital and Innovation works have reduced their holdings one after another.

Although Zhihu Inc. 's paid member income increased by 75.1% in the second quarter, it surpassed advertising to become the company's largest business for the first time. From the video of knowledge to the creation of story content IP, Zhihu Inc. has been looking for a way out for commercial realization. Judging from the performance in the second quarter, Zhihu Inc. still needs to make efforts on cost control while commercializing.

How to protect users' right to know?

The blind watermark exposed this time is similar to the UID information of the user. When the user uses the screenshot function on the Zhihu Inc. page, the image and the blind watermark will be truncated into the image together.

(blind watermark information shown in Zhihu Inc. 's screenshot after processing)

Zhihu Inc. adding a blind watermark to a user page is not an industry precedent. In early 2022, Douban was exposed to embed a blind watermark on a user page. Douban embeds not only the user's UID, TID (access terminal) and other information, but also the time zone and complete time information.

As for the addition of blind watermarks, Douban explained that this is part of the platform's "group content anti-handling function". When this function is enabled, the blind watermark will contain the user's UID information in the images captured by the logged-in user. If you are not logged in, the blind watermark will contain TID as well as time, time zone and other information.

Prior to this, BABA tracked down the technician who killed the moon cake with a script in the "moon cake incident". In this process, the blind watermark played an important role.

(blind watermark content of Douban)

Different from the visible watermark, blind watermarking is characterized by concealment and anti-interference. A person in the Internet industry told Investor that the blind watermarks added by platforms such as Zhihu Inc. and Douban on the web page are still in a relatively primary form, and programmers can find out by looking at the code. Users can also easily identify whether their pictures are embedded with blind watermarks through software such as FotoForensics, which provides image analysis function. Even, users can avoid this more elementary blind watermark by taking pictures.

The more advanced form of blind watermarking is often called "digital steganography". This method is often used in the internal files and images of all kinds of enterprises to prevent leakage and trace the source of leakage.

(the basic process of digital steganography)

After this technology processing, the blind watermark embedded in the picture can resist all kinds of compression in the process of network transmission, even after cropping, discoloration and other post-processing.

Unlike Douban, Zhihu Inc. was exposed to insert a blind watermark without letting users know in advance. Douban will explain to users the use of blind watermarks at the bottom of the post, and the team leader can also choose to turn on or off the anti-handling function.

As a content platform, taking certain anti-handling measures will help to protect high-quality content, protect original authors, and strengthen the attractiveness of the platform itself to users while maintaining the monopoly of content. However, as a function that may disclose users' privacy, the platform should also protect users' right to know about the use of blind watermarks.

In this regard, Zhihu Inc. responded that the station is only testing the function in a small area, and at present, the feature has been offline.

Cost is difficult to reduce

The pressure of public opinion brought about by the storm of blind watermarking is difficult to compare with the performance pressure that Zhihu Inc. is facing at present. According to Zhihu Inc. 's financial results for the second quarter of 2022, Zhihu Inc. 's revenue in the first half of the year was 1.6 billion yuan, up 41.4 percent from 1.1 billion yuan in the same period in 2021. Of this total, the total revenue in the second quarter was 836 million yuan, up 31% from 638 million yuan in the same period in 2021.

In terms of business, Zhihu Inc. 's advertising revenue fell slightly in the second quarter to 238 million yuan, down 4.3 per cent from the same period a year earlier. Revenue from other businesses continued to increase. Among them, the income of paying members increased significantly, to 271 million yuan, an increase of 75.1% over the same period last year. The average number of monthly paid members reached 8.5 million, an increase of 78.3% over the same period in 2021, and the revenue of content commercialization solutions was 241 million yuan, an increase of 15.9% over the same period last year.

From the above data, it is not difficult to see that under the background of the weakness of the Internet advertising industry, Zhihu Inc. 's advertising revenue is under great pressure. However, the amount paid by users has increased significantly compared with the same period last year, indicating that users are more receptive to the content in the platform. The content commercialization business is also gradually shouldering the banner, rising from 0.1 per cent of revenue in 2019 to 32.9 per cent. At present, Zhihu Inc. 's three major businesses are in a state of "neck and neck".

But while his income is growing, Zhihu Inc. 's losses are also expanding. In the second quarter, the net loss based on non-GAAP was 444 million yuan, up 122% from a year earlier.

Zhihu Inc. 's income is still growing, but he has lost more. The reason is simple: Zhihu Inc. 's operating costs grew faster than revenue in the second quarter. The operating cost of the company in the second quarter of 2022 was 436 million yuan, an increase of 67 percent from 262 million yuan in the same period in 2021, according to the financial report.

Zhihu Inc. 's 67 per cent year-on-year growth in operating costs was the highest since Zhihu Inc. 's Q3 in 2020, while 31 per cent revenue growth was the slowest since Q3 in 2020. As the losses rise and fall, the losses will naturally widen.

In fact, Zhihu Inc. 's revenue growth began to fall after reaching 154 per cent in the first quarter of 2021 and fell below 100 per cent in the fourth quarter of 2021.

In the financial report, Zhihu Inc. said that the main obstacle for the company to turn around is that the cost of content is too high. Sun Wei, CFO, said: "We will continue to strive to enhance our commercialization capabilities and promote shareholder value in the long term."

Where are the shareholders?

But Zhihu Inc. 's shareholders may not have Sun Wei's patience.

In 2017, Today Capital participated in Zhihu Inc. 's $100m D-round financing. Xu Xin, president of Today Capital, said he regretfully missed Zhihu Inc. 's round C and finally got the opportunity to participate in D-round 's financing. A year later, Today Capital participated in Zhihu Inc. 's E-round financing.

However, in the financing after round E, the figure of today's capital can no longer be found.

In a twinkling of an eye, on April 11, 2022, Zhihu Inc. submitted a prospectus to the Hong Kong Stock Exchange to achieve a dual major listing, with 26 million Class A common shares planned to be issued all from early investors.

Before Zhihu Inc. landed in US stocks in March 2021, Capital Today held 16.2944 million shares in Zhihu Inc.. Before IPO, Hong Kong stocks held 15.3319 million shares. After the successful listing of Hong Kong stocks, the number of shares held by Capital today has dropped sharply to 3.3319 million shares, which is about 22% of that before the listing of Hong Kong stocks.

In addition to Today's Capital, Innovation works, QiMing Venture Partners and Saifu also showed signs of reducing their holdings, reducing their holdings by 7.5 million shares, 3.1658 million shares and 3.2502 million shares respectively.

At present, Zhihu Inc. 's US stock price has fallen nearly 90% from the beginning of the listing, and the shareholders who still stand firmly behind Zhihu Inc. are mostly Internet companies such as BABA and Tencent. Among them, Tencent holds 12.02% of the shares, even more than founder Zhou Yuan's 11.64%.

Zhihu Inc. is 11 years old and is still losing money. Zhihu Inc. is still on his way to find more commercial directions for high-quality content. (produced by thinking Finance) ■