On August 28, Meitu (1357.HK) officially disclosed its 2023 interim results. During the reporting period, the company achieved total revenue of 1.261 billion yuan (RMB, the same below), a year-on-year increase of 29.8%. After adjustment, the net profit attributable to equity holders of the parent company was 151 million yuan, a year-on-year increase of 320.4%.
Judging from the financial report, Meitu's revenue and profits have increased to a certain extent in the first half of the year, and the overall performance is good. This is because Meitu aims at the huge demand for digital content creation market and is committed to meeting the needs of digital content communicators.
C-side: Borrowing the power of AIGC
The financial report shows that Meitu's largest revenue contribution in the first half of 2023 is the imaging and design product business with VIP subscription as the main monetization model, with revenue of 602 million yuan, a year-on-year increase of 62.2%, continuing to hit new highs.
On the one hand, with the support of AIGC, the number of Meitu VIP paid subscribers has increased, making a huge contribution to the increase in profits. Facing the C-end market, Meitu mainly operates apps such as Meitu Xiuxiu, Beauty Camera, and BeautyPlus. The reason for the substantial growth in APP-related revenue is the increase in the number of VIP members. According to the data reported in the 2022 mid-term report, several apps owned by Meitu have a total of about 5 million VIP users. As of June 2023, the number of VIP members of Meitu has exceeded 7.2 million, a year-on-year increase of 44%, and the paid penetration rate is 2.9 %, hitting a record high. VIP paying users are growing rapidly, mainly because the application of AIGC technology brings functional iteration.
Starting in 2023, Meitu will centrally update AIGC-related functions on various Apps. Take Meitu's Beautycam as an example. In the first half of 2023, it launched AI image cutout, AI one-click beautification, AI video subtitles, AI elimination and other functions. Many AI functions require VIP subscription to unlock, and non-members can only experience the basic version. In the growth of operating costs in this financial report, cloud computing costs caused by users' use of AIGC technology accounted for a large part, which also proves from the side that users use AI functions more frequently.
This is inseparable from Meitu’s continuous research and exploration in the field of AI. Since the establishment of Meitu Imaging Research Institute (MT Lab) in 2010, Meitu has registered 451 patents, holds 192 software product copyrights, and has achieved many honors and breakthroughs in the AI field. According to the financial report, the company invested 294 million yuan in research and development in the first half of the year, a year-on-year increase of 10.8%. Meitu emphasized that the increase in its own research and development costs is mainly due to continuous investment in research and development of AI-based image processing and recognition technologies. Take MiracleVision, a self-developed large-scale AI vision model released by Meitu on June 19, as an example. It has been upgraded to version V2.0 and has been launched on Meitu Xiuxiu, allowing AI image creation to be further upgraded.
But on the other hand, the total number of Meitu monthly active users is relatively limited, and the growth it brings is also relatively limited. Judging from recent financial reports, as of December 2020, the monthly activity was 261 million, as of June 2021, the monthly activity was 246 million, as of December 2021, the monthly activity was 231 million, and as of June 2022, The monthly active users are 241 million. As of December 2022, the monthly active users are 242 million. The number of monthly active users has not changed much.
Judging from the 2023 interim financial report, Meitu's marketing costs increased by 21.3%. Meitu said that it is using more marketing investment to acquire more new users for the App and convert more paying users. But judging from the results, although there are more paying users, the overall MAU (monthly active) plate has not changed much. But looking forward to the future, Meitu will have the opportunity to seize a larger market in the future by relying on the recognition of these 247 million monthly active users and providing a creative image product portfolio driven by AIGC.
B-side: Continue to invest in SaaS business
Meitu is a company that started out as a to-C product. Now it is actively expanding its to-B business, and certain results can already be seen in its financial reports. Beauty solutions, also known as SaaS services, is a new business launched by Meitu in 2021, and has now become Meitu’s third largest revenue segment. The financial report shows that in the first half of 2023, the beauty industry solution business revenue was 286 million yuan, a year-on-year increase of 31.1%. In terms of revenue, it is already close to the traditional advertising business.
In terms of costs, the costs of the 2022 interim report have increased significantly compared to 2021. The reasons mentioned in the financial report are the addition of SaaS costs and the increase in the cost of Daren Content Marketing Business (IMS). In 2023, the IMS business will be abandoned, and the cost of SaaS will still be added. The financial report did not provide detailed cost proportions of these businesses, but through the description of operating costs, it can be seen that Meitu continues to invest in SaaS business.
First, Meitu has been providing SaaS solutions for various industries. Specifically, Meitu provides AI skin testing and related SaaS solutions to global skin care brands, medical beauty institutions and beauty salons through "Meitu Skin", which has been deployed in more than 3,600 stores around the world, and has partnered with Dior, Shiseido, and Avon. , Fan Wenhua and more than 140 well-known brands have reached strategic cooperation. Meitu provides cosmetics ERP and supply chain management SaaS solutions to more than 10,000 cosmetics stores in China through "Meidede", helping customers optimize cosmetics purchasing decisions and increase market share.
Secondly, Meitu is oriented towards the B-end market, and its product categories are particularly comprehensive. It is understood that Meitu currently has 7 products in its product matrix for creators and professional users, covering various fields such as photography, beauty, and design. They are the AI visual creation tool "WHEE", whose number of high-quality AI effects generated has exceeded 2 million; the AI spoken video tool "Start Shooting", with monthly active users exceeding 200,000; the desktop AI video editing tool "WinkStudio"; which focuses on AI "Meitu Design Studio" for commercial design; Meitu AI assistant "RoboNeo"; AI digital human generation tool "DreamAvatar", focusing on two major digital human services: "AI anchor" and "AI actor"; there are more than 30,000 businesses Photography agencies and more than 1 million users choose to use "Meitu Cloud" to improve the efficiency of photo editing. It can be seen that Meitu is launching more AIGC-based new functions and new products for the to B business.
According to Meitu’s financial report, to B’s digital image productivity tool market is 4-5 times larger than to C’s consumer market. However, although the revenue of the to B business has grown well, the profit is still not very high, and the growth rate is lower than that of the App-related business, and there is still a lot of room for improvement.
Advertising business slows
Regarding Meitu’s online advertising business, the financial report shows that advertising business revenue in the first half of 2023 was 349 million yuan, a year-on-year increase of 28.2%. Although revenue has increased from 272 million yuan in 2022, it is still less than 392 million yuan in 2021. Overall, the advertising business is slowing down due to various influences.
First, the overall development speed of online advertising has slowed down in recent years. Zhongguancun Interactive Marketing Laboratory, together with PricewaterhouseCoopers, Miaozhen Academy of Marketing Science, and Beijing Normal University School of Journalism and Communication, jointly released the "2022 China Internet Advertising Data Report", pointing out that the structural adjustment of the Internet advertising market has entered the deep water zone, and the market size has experienced a correction for the first time. , the growth rate of advertising revenue of industry giants has slowed down.
Entering 2023, according to the "2023 Chinese Advertiser Marketing Trend Survey" report released by CTR, 31% of advertisers said they would increase marketing and promotion expenses, and 39% of advertisers expressed the idea that marketing and promotion expenses would remain the same as last year. 30% of advertisers will reduce marketing and promotion expenses. Last year's three data were 32%, 39%, and 30% respectively. The almost identical data just shows that advertisers have shown great caution when planning their annual marketing budget for this year.
Second, online advertising is no longer Meitu’s core business. In 2021, online advertising business will still be Meitu's largest source of revenue, but at the same time, Meitu's second largest business is the rapid growth of VIP subscription and imaging SaaS business. By 2022, the image and design product business revenue of 371 million has surpassed that of the advertising business by 272 million. This year, the revenue growth of the imaging and design product business has far exceeded that of the advertising business, and even the SaaS business is about to catch up with the advertising business. Moreover, as R&D costs and marketing costs increase year by year, it is enough to show that Meitu's business focus has gradually shifted.
Overseas performance needs to be improved
Generally speaking, Meitu's performance in the domestic market in the first half of 2023 is very good, but the overseas market still needs to be strengthened.
First, Meitu’s overseas monthly active users have not grown significantly. The financial report shows that as of December 2020, Meitu had the highest number of overseas monthly active users, at 97 million. After that, it continued to decline slightly, and it did not rebound until December 2022, at 79 million. However, as of June 2023, Meitu’s overseas MAU dropped to 73 million. Overseas monthly active users are growing slowly or even slightly, which shows that Meitu’s overseas toC business is not so optimistic.
Second, Meitu faces fierce competition overseas. This year can be said to be a hot year for AI photo editing tools. Both mature companies and startups are gathering in this category. Meitu faces fierce competition overseas. For example, Remini, the AI photo retouching product that became popular this year, is an App that focuses on one-click beautification and old photo restoration based on AI. It has subsequently added AI-related functions, and its global monthly revenue will reach 10 million in July 2023. US dollars. In contrast, in this wave of AI photo retouching craze, the dividends Meitu has received overseas are not obvious. In terms of Diandian data, no significant growth has been observed in the overseas revenue data of several representative apps of Meitu.
However, the overall situation Meitu faces overseas is improving. According to the financial report, Meitu’s products rank among the top 10 in the App Store free list in Brazil, Thailand, the United States, Japan and other countries. According to data.ai’s ranking of Chinese non-game manufacturers’ overseas revenue, Meitu ranked fourth. It is not difficult to see that Meitu has broad development prospects overseas. Perhaps because of this, Meitu's next strategic focus is to focus on "productivity and globalization."