The gross profit rate of 1q21 performance conference minutes was significantly increased to 57%, and the ecological value of the content was highlighted From Zhihu

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On May 17, 2021, Zhihu released the company’s unaudited financial report for the first quarter ended March 31, 2021. According to the financial report, Zhihu’s total revenue in the first quarter was 478.3 million yuan (RMB, the same below), a year-on-year increase of 154.2%; The average number of monthly active users in the first quarter was 85 million, up 37.7% year on year; The number of paid members increased to 4 million, with a year-on-year increase of 138%, and the penetration rate of paid members reached 4.7%.

1、 Main achievements: in the first quarter of 2021, Zhihu’s total revenue grew rapidly, the revenue of paid members and content business solutions increased by more than 100% year on year, and the gross profit and gross profit rate increased significantly.

1. Performance overview: Zhihu’s total revenue in the first quarter of 2021 was 478.3 million yuan, an increase of 154.2% over the first quarter of 2020.

2. Revenue of various businesses: at present, Zhihu’s revenue channels mainly include online advertising, paid members, commercial content solutions and other businesses (including online education and e-commerce). In the first quarter of 2021, Zhihu’s online advertising revenue was 213.7 million yuan, a year-on-year increase of 70.1%; The income of paid members was 126.6 million yuan, a year-on-year increase of 127.0%; The revenue of content business solutions was 120 million yuan, accounting for 89% of last year’s revenue; Other business income was 17.1 million yuan.

3. Gross profit and gross profit margin: in the first quarter of 2021, Zhihu’s gross profit was 272.7 million yuan, an increase of 248.5% compared with the same period in 2020, and the gross profit margin increased to 57%, compared with 41.6% in the same period in 2020.

4. As of March 31, 2021, the total amount of cash, cash equivalents, time deposits and short-term investments held by Zhihu was RMB 7.96 billion.

2、 Business data: in the first quarter of 2021, thanks to the content driven, the number of monthly live users and paid members of Zhihu increased rapidly. At present, the company’s content ecology has strong domain expansion, and multi domain content can well meet the needs of different user groups in different scenarios.

1. In the first quarter of 2021, the average number of monthly active users of Zhihu was 85 million, a year-on-year increase of 37.7%.

2. In the first quarter of 2021, the number of Zhihu paid members increased to 4 million, with a year-on-year increase of 138%. The penetration rate of paid members reached 4.7%, with a year-on-year increase of 2%

3. In the first quarter of 2021, Zhihu’s ARPU based on advertising revenue and content solution increased by 91.8% year on year.

3、 Recent development of the company: on March 25, 2021, on the occasion of its 10th anniversary, Zhihu successfully listed on the New York Stock Exchange, starting a new journey. Zhou Yuan, founder and CEO of Zhihu, said that the company will continue its video strategy to further promote the growth of the content community.

After the release of the financial report, Zhou Yuan, founder and CEO of Zhihu, Sun Wei, CFO of Zhihu and other senior executives attended the financial report conference call to interpret the key points of the financial report and answer questions from analysts.

Summary of Zhihu Q1 performance conference in 2021

Question 1: we have seen that the growth of Mau in the past quarter is very optimistic. What are the factors driving this growth? Can this growth be sustained in the future?

A: Zhihu’s user growth has always been driven by content. We now have a high proportion of new users, which comes from the natural growth driven by content. Zhihu’s profile of new users in the past period of time is similar to that of our market as a whole. Relatively speaking, the proportion of the month on month growth of new female users will be higher.

Zhihu’s content ecology has strong domain expansibility, and multi domain content can well meet the needs of different user groups in different scenarios. We have the best pan knowledge content and creator group, and we have always been leading the industry and growing healthily. For example, UV in the field of materials science has increased by more than 220% and microeconomics has increased by more than 569%.

At the same time, Zhihu is very active in all kinds of interesting content fields, such as animation, digital and game fields. We have attracted more young users in the past period of time, and the proportion of young users under the age of 25 has increased significantly year on year.

At the same time, in addition to the fields of Pan knowledge and various interests, Zhihu is also growing rapidly in the fields of helping users solve practical problems. For example, in the field of education, there are nearly a million users browsing the postgraduate entrance examination content in Zhihu every day. In the field of food, which can help users improve their life skills, and in the field of workplace, which can answer the puzzles of young people who have just entered the workplace. The changes in these fields will help users not only meet the exchange of interests, but also continuously solve various problems in life and work.

We can see that in these new content areas, both in terms of retention and customer acquisition costs, they have a good performance in the industry, so we know that we will continue to increase the relevant investment and customer acquisition scale.

Question 2: Zhihu’s data of visitors in the IPO process is also very high. What’s the situation of these visitors now, and how many of them can be converted into Mau users? thank you.

A: on the second question, we know that the number of monthly users is 460 million, which is stable on the whole. At the same time, our Mau proportion of monthly browsing users is now steadily increasing.

Question 3: I would like to ask two questions. The first is about the strategy of video, whether we can share some data about the consumption and production scale of video, and the penetration in Mau and content creation. Next, what key actions will be taken this year to further improve the production and consumption of video?

A: video content is a very important part of Zhihu content system. In the past, the amount of video creation and consumption in the community have increased significantly. The average daily upload volume of more than one minute video in the quarter increased by 17 times over the same period last year, and the per capita consumption of video duration synchronization is also growing, which has exceeded 60%.

Chinese communities are highly open and can accommodate different types of creators, media forms and user groups with different needs. Now in the community, the penetration rate of video consumer users in dau has reached 30%. We really like watching videos in Zhihu. With the development of Zhihu’s product and technology innovation, video will become a necessary creation tool for Zhihu’s creators. I think every Zhihu answer will have a corresponding video version. Graphics and video are part of the content system.

We can see that, on the one hand, video shows a good atmosphere in the community, and the quality and category of content are developing healthily. On the other hand, in the whole industry, China video is still in the early stage of development. We can compare the content community dominated by China video, which now adds up the average daily upload volume to several hundred thousand; The next stage, will break through the scale of one million, the market space is very large. We firmly believe that more high-quality video creators and content will be produced in Zhihu community.

Different from other platforms in the industry, community development is driven by community ecology. The healthy development of community ecology will form content, including the accelerated development of video content, which will feed back the progress of community ecology. In the past quarter, we have actively and effectively cracked down on low-quality video content, which provides more exposure opportunities for high-quality content. At the same time, it also provides better growth space for high-quality content creators. Zhihu plans to continue to expand the structural adjustment of high-quality content mechanism in the next quarter, continue to increase the construction of community ecology, and promote the overall progress.

Question 4: I want to ask about the gross profit rate. I see that the gross profit rate has increased a lot in this quarter. Can you share the gross profit rate of different business sectors, for example, the gross profit rate of online advertising and membership business, and how to look at the outlook of gross profit rate in the coming quarter.

A: Zhihu’s gross profit rate reached 57% in the first quarter of 2001, which is a significant increase compared with that in the first quarter of last year. This is mainly due to several reasons. The first is the scale effect brought about by our revenue growth. Our revenue lines such as Zhi +, members, etc. have all increased by more than 100%. At the same time, our advertising revenue has also increased by more than 70%. The scale effect brought by these fast-growing businesses makes the gross profit rate grow relatively fast.

The second point is that Zhihu’s revenue structure is also undergoing great changes. The proportion of Zhihu + business with very high gross profit in revenue has increased from about 1% in the first quarter of 2020 to 25% in the first quarter of 2021. The gross profit rate of Zhi + business is very high, so it brings the corresponding increase of the overall gross profit rate.

Finally, some of Zhihu’s costs do not increase year-on-year with the growth of revenue. For example, the growth rate of bandwidth and server costs is far lower than that of revenue. It mainly reflects the scale benefit brought by the overall income growth, and the income growth does not bring about a substantial increase in fixed costs in the same proportion. These are the main reasons for the growth of gross profit rate.

As for the future change of gross profit rate, with the promotion of the company’s overall video strategy, it will increase subsidies for high-quality video creation and video creators, encourage video creators to answer videos, and correspondingly increase investment in content. Because our gross profit rate is relatively high, we are given the opportunity to subsidize the content and video, so the gross profit rate may be slightly adjusted in the next few quarters.

Question 5: this problem is about Zhihu’s content commercialization solution. Behind the strong performance of the first quarter, which advertisers or business customers can share with you?

A: the development of content business solutions has indeed exceeded expectations. The revenue of this quarter has reached 127 million, which has reached 89% of last year’s annual revenue. Compared with the first quarter of last year, the growth rate has also exceeded 100 times. In fact, the month on month increase is more than 58%, and the growth is really very rapid.

From the perspective of growth drive, it is mainly caused by two factors. First, the number of brands and businesses launched by Zhi + has increased greatly, which is almost 10 times higher than that in the first quarter of last year. In addition, due to the increase of businesses, there is fierce competition for knowledge + products among many businesses, which brings about the overall improvement. Compared with last year, there is also a very significant growth. In general, it is the increase of quantity and price that drives the rapid growth of the whole knowledge + business.

From the perspective of the industry covered, because zhi+ products are very original and have high conversion rate, they are widely welcomed by business brands. At present, the main industries covered include FMCG, education, auto finance, it, 3C and many other fields. Judging from the relatively concentrated fields of businesses putting in brands, FMCG and education are relatively high fields.

Question 6: this question is about Zhihu’s sales and marketing expenses, which have nearly tripled compared with the first quarter of last year. I want to know what are the main investment areas behind this and how to view the trend of offline enterprises.

A: Sales and marketing expenses did increase in the first quarter. The main reason for the increase is that in January, it coincides with the 10th anniversary of Zhihu. We have done a series of brand activities, including answer adventure night party, Xinzhi Youth Conference and so on. This series of brand activities, in fact, are of great help to the recognition of existing users and potential users. We also think that similar brand activities will help Zhihu’s user growth in a longer time dimension. These brand project activities actually account for a large part of the budget, which is something Zhihu has rarely done in the past two years or so. This year we did this activity on the 10th anniversary.

While increasing the market share, Zhihu is also very concerned about the efficiency of user acquisition. The cost of acquiring users is still 37 yuan, which is still at a very low level.

Question 7: my question is mainly about the advertising business. I just mentioned that the performance of brand advertising is very good. What’s the performance of effect advertising and what’s the future trend?

A: first of all, Zhihu’s advertising revenue is growing rapidly. It has increased by 70% in the past year. The main driving factor is the rapid growth of brand advertising. At present, our advertising is divided into brand and effect. In the past year, brand advertising accounted for a relatively high proportion of revenue, contributing to a higher revenue growth, mainly because of the product iteration in the brand aspect. In addition to the traditional flow based brand advertising, it will also provide more long-term value for the brand side based on content, helping the brand side create high-quality and precipitable good content, This is mainly the core reason for the rapid growth of brand advertising in the past quarter. Our brand advertising budget mainly comes from the increase of revenue of Ka brand advertisers.

The growth rate of Zhihu project advertising is lower than that of brand advertising, which is also in line with the strategic direction. In terms of strategy, we also hope that with the growth of users and the improvement of brand awareness, we can get more brand advertising budget, especially from Ka brand advertisers.

In the future, the core driving factors of Zhihu’s advertising revenue growth will be based on the growth of users and the promotion of Zhihu’s brand recognition as a community. At the same time, the distribution of media forms brings the growth of user content consumption depth, which drives the growth of advertising.

Information view: Encyclopedia Britannica history review: 2014 Zhihu user survey data report: 2020 e-commerce growth drivers Industry Report (with download) comScore: search drives quora growth Hitwise: comparison of monthly visits between quora and Yahoo Q & A from November 2010 to November 2011 The survey shows that iPad is the least problematic tablet computer. Quora: the gap that Q & A websites need to bridge. July 2011: people aged 25-44 are the three major Q & A websites in the United States. Hitwise: the survey shows that quora users are younger and richer. Formspring: in Q1 2011, there were 25 million users and 40 million monthly independent visitors Will Qura replace Wikipedia? ComScore: 2011 global social networking report focuses on user interests rather than real social circles ask.com: mobile app users answer more questions than website users

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