China’s Instagram-like app Xiaohongshu expected to top $1 billion profit ahead of potential IPO

Xiaohongshu, a Chinese social platform often likened to Instagram, is expected to double its profit to more than $1 billion in 2024 ahead of a potential IPO, Bloomberg reported on Thursday. The potential milestone reflects the platform’s renewed focus on profitability over user growth, which has slowed since its peak during the COVID-19 pandemic, according to a source familiar with the matter.

Founded in June 2013 by Charlwin Mao Wenchao and Miranda Qu Fang, Xiaohongshu initially focused on advertising and e-commerce. During the pandemic, the company raised Series E funding and shifted its focus to livestreaming commerce. In 2023, Xiaohongshu reorganized and restructured, elevating livestreaming to an independent department and resolving internal friction between its community and commercialization efforts.

Since its inception, Xiaohongshu has avoided aggressive commercialization strategies in favor of attempting to maintain its community ecosystem. This approach has allowed the platform to see rapid growth in daily active users and high user stickiness, though the question of when it would become profitable had become a point of concern for shareholders. According to reports, Xiaohongshu’s major investor, Sequoia Capital China, sought to sell shares at a $14 billion valuation in October 2022. Meanwhile, its competitors, including Douyin (China’s TikTok sibling) and video platform Bilibili, have posed frequent challenges. According to the Financial Times, Xiaohongshu achieved a historic milestone in 2023, turning a profit for the first time. Revenue soared to $3.7 billion last year, an 85% year-on-year increase, while net profit reached $500 million, compared to a loss of $200 million in 2022. [Bloomberg, TechNode reporting]