The little red book in anxiety is one step further away from being listed.
Recently, Yang Ruo, the former CFO of Xiaohongshu, has officially resigned to join Fosun Group. In response to this, Xiaohongshu responded that Mr. Yang Ruo had recently resigned as the company's chief financial officer due to family reasons.
As we all know, the fate of the CFO reflects the progress of a company's listing. During his one-and-a-half-year tenure, Yang Ruo's joining was once speculated by the market to help Xiaohongshu open the door to the capital market.
Right now, Xiaohongshu has been rumored to go public many times, but there has been no new progress. The resignation of the CFO has made it even worse on the 'lost' road to listing.
In fact, Xiaohongshu is favored by capital, with a valuation of up to 20 billion U.S. dollars, but it has not been listed on the market for a long time. Behind this, in addition to the tightening of regulatory policies, more importantly, Xiaohongshu has never found a way to commercialize.
For a long time, it is easy to plant grass and difficult to pull out weeds, which makes Xiaohongshu trapped in the curse of the content community for a long time.
The most prominent performance is that since 2014, from cross-border e-commerce to live streaming, Xiaohongshu has tried to commercialize through e-commerce, but it has had little effect. Until now, advertising is still the main pillar of its revenue.
Once the advertising business is impacted, Xiaohongshu will face huge revenue risks. This also means that it is imperative for Xiaohongshu to find new stories.
In the past few years, with the rise of surrounding tourism and local tourism, Xiaohongshu has tried to use outdoor sports as a starting point to penetrate into the tourism market by virtue of its advantages in planting grass. Taking camping as an example, with tens of thousands of notes to grow grass, Xiaohongshu is the first platform to enter the domestic exquisite camping market.
But camping alone is not enough. The tourism market is already full of players such as Ctrip and Meituan. Xiaohongshu wants to occupy market share, so it is not a long-term solution to cultivate grass tourism.
In fact, after the content community platform grows to a certain stage, it is often caught in a dilemma between maintaining the community ecology and commercial realization. This has also led to Xiaohongshu’s failure to explore another perfect commercialization path besides advertising.
Today, even with 200 million DAU, it is difficult for Xiaohongshu to get out of the 'lost path'. In the future, can Xiaohongshu explore a new business path? Can the e-commerce dilemma be solved? Can tourism become the new story? The answers to these key questions determine the listing process of Xiaohongshu.
01 How long can Xiaohongshu be 'listed'?
Nine years after its establishment, listing is an unavoidable topic for Xiaohongshu at this stage.
In March last year, the joining of 'Mr. Key' Yang Ruo gave Xiaohongshu a 'browser' in the listing process.
According to public information, before joining Xiaohongshu, Yang Ruo served as managing director of the Asia-Pacific region of the TMT Investment Banking Department of Citigroup, and also worked in Ernst & Young San Francisco Branch and PwC China. In addition, Yang Ruo has participated in the listing process of many companies such as 58.com, YY, and ZTO Express.
Also since then, rumors of the listing of Xiaohongshu have been continuously exposed.
In April last year, Reuters reported that Xiaohongshu planned to go to the US for an IPO in the middle of the year, raising about US$500 million to US$1 billion. One of the people familiar with the matter even said that the company had secretly submitted an application for listing in the United States, and Xiaohongshu declined to comment on market rumors.
In July, Bloomberg reported that Xiaohongshu would suspend its listing in the United States. The outside world speculated that the reason might be related to China’s increased data supervision of overseas listed companies. After the U.S. stock market collapsed, in October last year, Xiaohongshu was rumored to be planning to go public in Hong Kong. In this regard, Xiaohongshu responded that it has no clear IPO plan.
It has been repeatedly rumored to be listed, and has been denied one after another. When Xiaohongshu will be listed has become the focus of attention from the outside world. Today, the story has changed again.
According to 36 Krypton reports, Yang Ruo, the former CFO of Xiaohongshu, has resigned. According to public information, after Yang Ruo joined Xiaohongshu, he was responsible for the formulation of the company's financial strategy, financial management and internal control.
The resignation of CFO Yang Ruo indicates that Xiaohongshu’s road to listing is temporarily interrupted.
In fact, from the perspective of financing process and valuation, Xiaohongshu is popular and highly anticipated.
According to Tianyancha, so far, Xiaohongshu has completed 6 rounds of financing, with a cumulative amount of hundreds of millions of dollars. Among them, the latest round of financing occurred in November last year, with a financing amount of US$500 million. It was led by Temasek and Tencent, and old shareholders such as Alibaba, Tiantu Investment, and Yuansheng Capital participated in the investment.
The listing of Xiaohongshu is 'lost'
Xiaohongshu’s financing situation, picture/Tianyancha
This is three years after Xiaohongshu’s D round of financing in 2018. In the past three years, Xiaohongshu has continued to expand rapidly. According to Quest Mobile data, from 2020 to the present, the DAU of Xiaohongshu has increased from 20 million to 65 million, and the MAU has reached about 160 million.
With the growth of performance, the valuation of Xiaohongshu has risen. The post-investment valuation is as high as US$20 billion, nearly four times the US$3 billion valuation after the D round of financing in 2018. Compared with similar community platforms, the valuation of Xiaohongshu is 4 times that of Weibo, 20 times that of Zhihu, and more than 2 times that of Bilibili.
Today’s Xiaohongshu wants to support the valuation of 20 billion US dollars, which is not easy. Today's Little Red Book, even if it goes public, it is difficult to tell a story, but carrying the expectations of capital and the attention of the market, Little Red Book may only go public.
02 Little red book e-commerce dilemma to be solved
If Xiaohongshu wants to go public, the first thing to solve is the problem of commercialization. But Xiaohongshu’s commercial anxiety has a long history.
Referring to the examples of many Internet companies, advertising and e-commerce will be the final destination. Today, such a story is staged on Xiaohongshu.
Perhaps in the conception of Xiaohongshu, from planting grass to weeding, it is a clear and reasonable business path.
The listing of Xiaohongshu is 'lost'
Picture/Xiaohongshu WeChat public account
Under this path, Xiaohongshu started cross-border e-commerce as early as 2014. At that time, Xiaohongshu launched the e-commerce platform 'Welfare Society', and then built bonded warehouses and general trade warehouses in Zhengzhou, Shenzhen, Shanghai and other places, covering a combined area of more than 50,000 square meters, and finally built a set including The e-commerce chain of all links such as procurement and sales, warehousing and logistics, and customer service.
In the second quarter of 2016, Xiaohongshu ranked third with a market share of 16.3% in self-operated cross-border e-commerce. But then, cross-border e-commerce quickly changed due to the impact of policies, and Xiaohongshu's cross-border e-commerce business also continued to decline. According to data released by Analysys International, in the fourth quarter of 2020, Xiaohongshu ranked seventh among China's cross-border import retail e-commerce companies, with a market share of only 2.4%.
During this period, Xiaohongshu’s strategy for e-commerce has been vacillating and its attitude has been vague.
In 2017, Xiaohongshu did not recognize e-commerce. Co-founder Qu Fang once said, 'Xiaohongshu is not an e-commerce company. I think Xiaohongshu is a playground. Everyone enters this playground to browse and play. When you see something you want to buy, you can buy it, that’s all.”
According to this statement, Xiaohongshu began to emphasize the community atmosphere of planting grass, invited celebrities, sponsored variety shows, and began to become a 'national grass planting machine', but it 'faded away' from weeding.
The strong ability to grow grass makes Xiaohongshu a 'wedding dress' for others. According to iiMedia’s survey, nearly 60% of users use Xiaohongshu to “understand product introduction and user experience”. In Xiaohongshu, users are just making strategies, and have not developed the habit of consumption, which cannot form a closed business loop.
In 2020, when live broadcasts are popular, Xiaohongshu is long overdue. At that time, Liu Huantong, the person in charge of the creation account of Xiaohongshu, said bluntly that 'GMV is not the core indicator of Xiaohongshu's live broadcast'. Under the Buddhist attitude, this year, the GMV of Xiaohongshu is less than 7 billion yuan, which is far inferior to the hundreds of billions of GMV of Douyin Kuaishou.
It should be noted that there is a big gap between live streaming, a form with a strong monetization purpose, and the community atmosphere of Xiaohongshu. In addition, the Xiaohongshu system also lacks an important role in live broadcasting and delivery-anchor.
More importantly, e-commerce is a complex business. Not only does it need to reach consumers at the front end, but it also needs to consider the supply chain, contract fulfillment, payment and other links at the back end. These are not the strengths of Xiaohongshu.
Later, Xiaohongshu became anxious, but it seemed that it was too late.
In August last year, Xiaohongshu cut off the functions of Taobao and other external links that had been open for less than a year, and launched the 'integration of accounts and stores' mechanism to open up content accounts and store accounts, lowering the threshold for bloggers to open a store. In January 2022, Liu Huantong, head of Xiaohongshu's e-commerce section, resigned due to family reasons. During this period, news of layoffs of the e-commerce team also flowed out.
On and off, Xiaohongshu has explored e-commerce for nearly eight years, but until 2020, the advertising business still accounts for 80% of its total revenue. The single revenue structure increases the risk of Xiaohongshu, and the e-commerce business has not yet become the second growth curve. The story of Xiaohongshu's 'community + e-commerce' is still lacklustre.
03 Is tourism a new story?
With capital and traffic in hand, Xiaohongshu can only tell more new stories and keep moving forward.
At the beginning of this year, in the OKR of Xiaohongshu COO Conan, there are two businesses from 0 to 1. One is local services including outdoor and urban life, and the other is virtual goods including content payment.
There is no doubt that the former process is faster. The so-called local services are mainly based on wine and tourism business. According to 36 Krypton’s future consumption report, the GMV of Xiaohongshu’s wine travel business will be 100 million in 2021, and this year’s goal is to reach 1 billion.
Such ambition does not surprise the market, because Xiaohongshu has never concealed its determination to travel.
As early as 2020, before and after the Dragon Boat Festival holiday, Xiaohongshu had carried out live broadcasts of 'Planting Grass Surrounding Tours' in Shanghai, Guangzhou, Xi'an, and Chengdu and their surrounding areas, and then released the '2020 Dragon Boat Festival Xiaohongshu' as a supporting package. Travel Trends Report'.
Earlier, Xiaohongshu announced that it would cooperate with the homestay apartment management system. More than 200 homestay brands have settled in Xiaohongshu and opened the direct booking function. Subsequently, Xiaohongshu launched the Red City urban plan, and carried out in-depth cooperation with Zhejiang Huzhou and Taizhou. Through the connection between the two places in the live broadcast room, it promoted Xiaohongshu Internet celebrity check-in points.
In a sense, the characteristics of Xiaohongshu give it a natural advantage in tourism.
Users plant grass tourist attractions through notes, and then promote the attractions to attract tourists. The grass-planting community + tourism is highly compatible. Since 2019, the content related to the tourism category of Xiaohongshu has become the second largest category after beauty makeup, and it is also the fastest growing category.
What really made Xiaohongshu's tourism business out of the circle was the popular camping project this summer.
Search camping on Xiaohongshu, there are more than 4.51 million notes. In the past two months, Xiaohongshu has made greater strides in camping. Not only did it build its own offline campsite 'Anji Xiaohanghang', but it also launched a self-operated store 'Little Oasis', which specializes in selling camping equipment and other outdoor products, and even established its own travel company.
However, if you step too fast, you will inevitably stumble.
In August, the disaster incident in Longcaogou, Longmenshan Town, put on the table the issue of Xiaohongshu’s supervision and review of camping grass planting notes. Previously, the 'false filter' incident in which Xiaohongshu's pictures were seriously inconsistent with the reality caused a series of discussions.
At that time, in order to calm the turmoil, Xiaohongshu urgently launched remedial measures. Starting from December 16, 2021, Xiaohongshu launched a special campaign for 'false planting grass'.
But in the end, this approach is a palliative, not a cure. From false filters to the Longcaogou disaster incident, Xiaohongshu, who wants to travel, has been caught in public opinion time and time again.
More importantly, camping is only a small entry point, and there are still many problems waiting to be solved by Xiaohongshu.
Looking at the entire tourism market, there are not many opportunities left for Xiaohongshu. According to data from the Huajing Industry Research Institute, in 2021, Ctrip's travel market will account for 36.3%; In other words, only 7.1% of the online travel market is left for other platforms.
In addition, for now, if Xiaohongshu wants to share the cake in the tourism market, it may also expand the OTA form. This means that transportation, accommodation, scenic spots, and all aspects of tourism need to be overcome by Xiaohongshu. This road is destined to be long.
If it is said that what Xiaohongshu pursued before was to let consumers reap happiness in the 'playground', then what Xiaohongshu has to consider now is its own long-term development. Listing may relieve the short-term pain of Xiaohongshu, but it cannot solve all problems. Xiaohongshu still needs to continue to explore new stories and let investors pay for it.