Kuaishou, China’s second-largest short video firm, has achieved a quarterly profit for the first time since its listing in early 2021, thanks to strong growth of its short video drama series, recovery ad revenue in China, growth in e-commerce revenues, and narrowed losses overseas. The company reported an adjusted net income of RMB 42 million ($6 million) in the January to March period, compared to a loss of RMB 3.722 billion a year earlier.
Why it matters: It is still uncertain whether Kuaishou can sustain its profitability going forward. The company’s first quarter profit was driven mostly by growth and recovery in the Chinese market, which generates 98% of the company’s revenue. Kuaishou has managed to narrow losses by 55% in its overseas revenue.
Domestic business: Short soap opera-style video series are a key offering that sets Kuaishou apart from other short video platforms, both in its domestic and overseas operations. These short video series, catering to mobile video audiences, have attracted more advertisers for the company and become a growth driver. In the first quarter of 2023, revenue from advertising sponsorship of Kuaishou’s short video dramas increased by more than 300% year-over-year.
- Kuaishou launched a total of 55 short video dramas during the 2023 winter break period. Among them, a show called Donglan Snow accumulated 100 million viewers within a record-breaking 40 hours of its launch, according to the company’s earnings report.
- Beijing-based Kuaishou has been profitable for four consecutive quarters in its domestic business, with operating profit standing at RMB 963 million during the latest quarter.
- Kuaishou’s advertising business generated revenue of RMB 13.1 billion, marking a 15.1% yearly increase. Online marketing services and livestream business accounted for nearly 90% of Kuaishou revenue in the quarter that ended in March, while the e-commerce sector is gradually providing a boost to the short video platform.
- Kuaishou’s livestream business revenue grew 18.8% reaching RMB 9.32 billion, and the number of monthly paying livestream users increased by 6.4% to 60.1 million in the first quarter of 2023.
- With an increasing number of monthly active paying e-commerce users and a rising average order price, Kuaishou’s e-commerce business achieved total sales of RMB 2.25 trillion in the first quarter. This contributed to a yearly growth of over 50% in other services, including e-commerce, totaling RMB 2.834 billion.
- Cheng Yixiao, the founder and CEO of Kuaishou, also told an earnings call that the company’s large language model is in the “training phase” and is leveraging the firm’s “previous technical expertise in AIGC algorithms and LLMs.” Kuaishou has already established an LLM model research and development team to explore the application of AI technology in its products.
Overseas business: Kuaishou’s overseas operations are currently focused on Latin America, with the short-form video app Kwai running in countries such as Brazil, while it also operates the SnackVideo app in Indonesia. This quarter, Kuaishou’s revenue outside of China grew more than six times year-over-year to RMB 338 million. The firm’s overseas business has maintained an extremely high growth rate for nearly a year, recording a 1,328.5% increase in revenue growth in the second quarter of last year alone.
- However, its overseas business remains in the red, even as its operating loss narrowed by 55.42% year-on-year to RMB 823 million in the first quarter.
- The TikTok rival did not release the latest data on daily active users and user time spent in markets including Brazil and Indonesia, but said “both have improved.” As of last June, overseas daily active users spent an average of more than 60 minutes a day.
- Kuaishou has also launched a content model in Latin America called TeleKwai, which aims to provide distribution opportunities for short video pieces created by local producers and content creators, usually under two minutes in length.