Alibaba and Tencent rarely invest in the same startup. Xiaohongshu, the social media and e-commerce hybrid commonly regarded as China’s Instagram, is one of the few exceptions.

Founded in 2013 by Charlwin Mao and Miranda Qu, Xiaohongshu, also called Little Red Book or Red, gained popularity among China’s young, middle-class, and mostly female consumers hungry for lifestyle and fashion tips. A favorite among investors, the consumption-oriented social media platform accumulated over $400 million in funding. Its most recent round, in June 2018, raised $300 million from the likes of both Alibaba and Tencent, among others, and valued the company at $3 billion.

Despite rapid early-stage growth, the content-driven app has struggled to land on a successful and scalable monetization model while maintaining its community feel. Unsuccessful attempts to commercialize have disappointed analysts and investors, who are losing patience with the company. So far, the app is still primarily a recommendation tool for users to post reviews and conduct research before making their purchases. With users heading to other e-commerce platforms or offline stores for the purchase itself, Xiaohongshu is leaving out the most lucrative link of an online buyer’s journey.

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Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.