Analyzing the 2022 Q4 Financial Results of Zhihu: Understanding the Reasons Behind Losses and Suggesting Strategies for Improvement

$Zhihu(ZH)$ $ZHIHU-W(02390)$ , a Chinese community-based question-and-answer website, has reported its financial results for Q4 2022, with revenue of CNY 3.605 billion, a YoY growth of 21.8%. However, it is worth noting that the revenue growth has significantly slowed down as compared to the previous year, where the revenue grew by an impressive 119%. Despite this, the net loss for 2022 was CNY 1.578 billion, which is 21.47% higher than the net loss of CNY 1.299 billion in the previous year. This suggests that the company's profitability has not improved, and this may be attributed to the company's positioning strategy.

Zhihu's revenue is generated through its advertisement and subscription services. However, Zhihu's management team seems to be struggling to come up with a profitable business model. The accumulated net loss of CNY 3.4 billion in the last 12 quarters is a clear indication of this.

One of the primary reasons for Zhihu's losses is the significant drop in advertising revenue, which can be attributed to the slowdown of the domestic economy due to the strict COVID-19 prevention measures. This has resulted in a significant decline in revenue growth. However, the company's subscription-based services have witnessed a positive trend, with an increase in paid users. This suggests that Zhihu's revenue stream may not be entirely dry, and the company can potentially improve its profitability through its subscription-based services.

Zhihu has also ventured into the field of vocational training. However, the competition in this field is fierce, and the company's future growth prospects are uncertain. This is a significant challenge that the company must address.

Furthermore, Zhihu is primarily a question-and-answer community, which may not appeal to investors as it lacks visual aids, such as images and videos. This has also affected the company's valuation, which is relatively low, with a market-to-sales ratio of less than 1.4 times. This indicates that there is limited room for improvement in the company's financial performance.

Although Zhihu's subscription-based services have shown growth, with an average monthly subscription of 13 million members in Q4 2022, generating CNY 1.23 billion, accounting for 34% of Zhihu's overall revenue. The vast majority of paid content is web novels and virtual stories. To improve profitability, Zhihu may need to explore new strategies, such as incorporating advertisements into its paid content. The company may also consider adding visual aids, such as videos and images, to its platform, which can attract more users and potentially increase revenue. Additionally, Zhihu can organize events for web novel and virtual story authors to interact with readers, which can further attract more users and help to reduce the net loss.

SWOT Analysis:

Strengths: Zhihu has a large user base and is popular in China. The company's subscription-based services have shown potential for growth.

Weaknesses: Zhihu's business model is not profitable, and its valuation is low compared to its competitors.

Opportunities: Zhihu can explore new strategies, such as incorporating advertisements into its paid content and adding visual aids to its platform.

Threats: The competition in the field of vocational training is intense, and the company's future growth prospects in this field are uncertain.

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  • ChrisColeman
    ·2023-03-31
    Not a good one. So many stocks and so many Chinese stocks. Why choose Zhihu?
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  • LesterTan
    ·2023-03-31
    Thank you for sharing this information.
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    ·2023-04-01
    OK
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    ·2023-03-31
    k
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    ·2023-03-31
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    ·2023-03-31
    up
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    ·2023-03-31
    Ok
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  • chantow
    ·2023-03-31
    thanks
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  • 老鼠林
    ·2023-03-31
    ok
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  • HuatKueh
    ·2023-03-31
    Thanks!
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  • LWayne
    ·2023-03-31
    ok
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  • Alex1709
    ·2023-03-31
    Noter
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  • Pandaaa
    ·2023-03-31
    nice
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    ·2023-03-31
    Ok
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    ·2023-03-31
    Ok
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    ·2023-03-31
    👍
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    ·2023-03-31
    okie
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    ·2023-03-31
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    ·2023-03-31
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    ·2023-03-31
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