On March 26, 2024, Zhihu (NYSE: ZH; HKEX: 2390) announced financial results for the fourth quarter and full year of 2023. Zhihu's total revenue for the full year of 2023 was 4.199 billion yuan (RMB, same below), up 16.5% year on year. Of these, Zhihu's total revenue for the fourth quarter was 1,138 billion yuan, up 2.2% year on year. In 2023, Zhihu continued to optimize operating efficiency and profitability. Net loss in the fourth quarter narrowed by 42.6% year on year. After adjustment, net loss fell below 100 million yuan for the first time since listing, and continued to move towards the goal of rapid profit and profitability growth.

Multi-engine commercialization strategy helps Zhihu continue to accelerate loss reduction

At the financial level, driven by diversified business models and multi-engine business strategies, Zhihu achieved continuous two-way growth in quarterly and annual revenue, showing resilience in commercial development. The ToC business represented by paid reading and vocational education grew strongly. In the fourth quarter, paid reading business revenue was 456 million yuan, up 13.3% year on year, and vocational education business revenue reached 169 million yuan, up 100.1% year on year. Revenue from the marketing services business was 465 million yuan.

Thanks to further improvements in operating efficiency throughout the year, in the fourth quarter, Zhihu's operating loss narrowed by 49.1% month-on-month, and net loss also narrowed by 42.6% year-on-year. The adjusted net loss fell to less than 100 million yuan for the first time since listing. The adjusted net loss ratio was 8.0%, reaching the lowest point since listing. Gross margin increased to 59.1% from 56.4% in the same period last year.

At the operational level, Zhihu continuously encouraged creators to produce high-quality content through multiple channels. By the end of 2023, Zhihu's cumulative number of content creators had reached 71.3 million, an increase of 13.0% over the previous year; the cumulative number of Zhihu content reached 775 million, an increase of 19.3% over the previous year. In 2023, Zhihu's average monthly active users (MAU) increased by 4.0% year-on-year, and the contribution of highly active users to high-quality content in diverse content fields continued to increase. At the same time, the paid reading business continued to provide users with high-quality paid content and experiences. In the fourth quarter, the average monthly subscription of Zhihu reached 14.2 million, an increase of 9.2% over the previous year.

Zhou Yuan, founder, chairman and CEO of Zhihu, said, “In the fourth quarter of 2023, we successfully coped with a challenging macroeconomic and competitive environment. With the support of a unique community ecosystem, we achieved significant revenue growth and efficiency improvements through a multi-engine commercialization strategy. We've also optimized our content strategy to strengthen Zhihu's position as a trusted community. By putting user experience first and improving strategy execution, cost control and overall efficiency, we have laid a good foundation for achieving sustainable growth and continuing to create value for users and stakeholders.”

Zhihu CFO Wang Han added, “Despite the challenges we face in 2023, we remain resilient and stick to our multi-engine commercialization strategy. As a result, our total revenue for the fourth quarter and the full year increased by 2.2% and 16.5%, respectively. Through prudent cost control and operating leverage, we are pleased to announce that this year's gross margin has further increased and net loss has narrowed sharply. Looking ahead, we will continue to work to improve operational efficiency and enhance our ability to achieve profitability.”

Stable diversified business models to create a trustworthy ecosystem “more than just a community”

Zhihu started with the community, but Zhihu's business model doesn't stop at the community. In addition to the community, Zhihu has nurtured a trust-based business ecosystem, and has successively launched two major brands, “Yanyan Story” and “Zhihu Knowledge Academy.” As the trustworthiness of the community increases, the operation of Zhihu's community content, users, and Zhihu's commercial flywheel will also continue to accelerate.

In the fourth quarter, Zhihu's diversified commercialization model was further stabilized. The vocational education business continued to maintain a rapid growth trend, and revenue doubled year-on-year. Zhihu's vocational education brand Zhihu Academy has covered more than 30 course categories in 6 major fields, and is one of the most comprehensive vocational education content systems in China.

As Zhihu's largest revenue source, the paid reading business increased 13.3% year-on-year, and the average monthly subscription reached 14.2 million, an increase of 9.2% over the previous year. Its Yanyan Story has become the largest production and consumption base for short stories on the entire network. At the same time, the story of Yan Yan accelerates ecological evolution from the dimensions of AI large-scale model application, pan-crowd expansion, and IP multi-media expansion, including reaching an open cooperation with Kuaishou in skit development and copyright library to jointly explore new ecological gameplay in the field of skits.

Based on a trusted community, Zhihu Marketing Services achieved 21.5% month-on-month growth in the fourth quarter. In 2023, more than 5 billion people read consumer content on Zhihu. 72% of Zhihu users are willing to pay a premium for good products. Zhihu users who buy 10 or more orders per month on JD are 10 times the TGI of users who buy 1 order per month. Especially in the digital field of home appliances, Zhihu has become the number one consumer decision-making platform and the first stop for marketing new brand products. Above the community, Zhihu has built a trustworthy commercial flywheel to help brands, creators, and users achieve a win-win situation.

At the “2024 Zhihu Discovery Conference” that was just held, Zhihu launched a series of products and initiatives in terms of community mechanisms, AI big model applications, and commercial solutions: introducing a new community interactive character mechanism “Navigator” in the “Sea Salt Project 6.0” to present more good content through community interaction; releasing the community AI function “Discovery · AI Search” based on the “Knowledge Sea Map AI” model, integrating search, real-time Q&A and questioning functions to bring new experiences to users; released the “DEEP TRUST marketing system” to continue to create a trust-based Commercial flywheel.

Zhou Yuan said that Zhihu started as a community, and the community became a trusted home for everyone, and there were more opportunities than just the community. “In the future, Zhihu will become a closed loop of openness, deeply cultivate the closed loop on the basis of trustworthiness, and expand more new opportunities for openness.”