Xiaohongshu, the Instagram-style app that took off among younger Chinese during the pandemic, is on track to double profits to more than $1 billion in 2024 ahead of a potential IPO.
Xiaohongshu Technology Co. has told investors its net income is on track to cross that milestone this year, people familiar with the matter said. That reflects a renewed focus on the bottom line over user growth, which has slowed in the years since its COVID-era heyday, the people said, asking not to be identified discussing confidential information.
The strong results are likely to revive speculation around the market debut of a startup valued at $20 billion in its last funding round in 2021. Xiaohongshu, which literally means “little red book,” started out like its U.S. cousin as a repository of personal travel and dining photos before branching out into reviews and live shopping. A Xiaohongshu representative didn’t respond to requests for comment.
Started in 2013 by Charlwin Mao Wenchao and Miranda Qu Fang as a shopping guide for Chinese tourists, Xiaohongshu now counts some 300 million monthly active users.
Its rapid growth comes in part at the expense of incumbent e-commerce leaders Alibaba Group Holding Ltd. and JD.com Inc. Like ByteDance Ltd.’s Douyin, the startup enjoyed explosive growth through getting influencers to sell products to millions of users. When shoppers scroll through videos and photos, they can buy tagged products with just a few clicks.
Still, online commerce is slowing more broadly as Chinese consumers tighten their belts during a severe economic downturn. Apps in general have also experienced a decline in growth from COVID-era peaks, when millions under lockdown turned to their smartphones for entertainment and necessities.
Like many closely held firms, Xiaohongshu isn’t obligated to disclose its finances, which in turn aren’t subject to independent audit. But many startups share their results with backers and potential investors.
Xiaohongshu, which is backed by Hongshan and Alibaba among other well-known names, is one of just a few Chinese internet leaders to remain privately held.
