Author: Zhang Hanjing; Source: Interesting Business
Since September this year, the price of Bitcoin has soared, and even exceeded $100,000 per coin on December 5.
Meitu (1357.HK) took advantage of this period to decisively sell all the cryptocurrencies it held. The announcement shows that Meitu has been selling its cryptocurrencies since November 2024, and as of December 4, all of them have been sold, with a total profit of approximately US$79.63 million (approximately RMB 571 million).
There are many companies that have personally engaged in "cryptocurrency speculation", but it is rare for companies like Meitu, whose main business has nothing to do with cryptocurrency, to make a fortune in the end.
Why did Meitu, which has been investing in cryptocurrency since 2021, sell all its cryptocurrencies this time? Does this also mean that Meitu will further "return to its main business"?
Meitu did not make a lot of money from investing in cryptocurrency at the beginning. In 2021, Meitu spent about $100 million to buy Bitcoin and Ethereum, but not long after Meitu entered the market, the currency circle ushered in multiple rounds of plunges due to various reasons such as regulation and Musk's pessimism.
Since then, the price of Bitcoin has fluctuated mainly between $30,000 and $60,000, and fell to around $16,000 in 2023.
At that time, industry insiders and investors questioned that cryptocurrencies were risky and that Meitu's move seemed too radical in the domestic market environment. Some people also questioned that Meitu was "speculating on cryptocurrencies" and "not doing its job properly." Meitu, which bought at a high price, soon suffered the consequences of Bitcoin; in the first half of 2022, Meitu's net loss reached 274.9 million to 349.9 million yuan, mainly due to the depreciation of cryptocurrencies.
Bai Wenxi, chief economist of the China region of the China Enterprise Capital Alliance, believes that cryptocurrencies are not legal in China, and "climbing the wall to speculate in cryptocurrencies" seems to be a gray area, and the legality of the currency circle is questionable, so the risk is relatively high; in addition, a company's excessive focus on speculating in cryptocurrencies may distract the company's management and neglect the deepening and expansion of its main business.
In fact, this is not the first time that Meitu has "did not do its job properly"; before speculating in cryptocurrencies, Meitu relied on the huge user base of Meitu Xiuxiu to explore multiple "side businesses".
The most successful exploration was the "Meitu mobile phone" that was popular among women at the time. In 2017, the sales of Meitu mobile phones, which relied on the photo beautification function, exceeded 1.57 million units, contributing about 3.7 billion yuan in revenue, accounting for more than 90% of the total revenue. However, as the competition in the smartphone market became increasingly fierce, by 2018, Meitu's mobile phone business had a loss of about 500 million yuan; at the end of 2018, Meitu licensed its mobile phone brand to Xiaomi and withdrew from the mobile phone market.
In addition to mobile phones, Meitu has also launched social products "Flash Chat" and short video products "Meipai"; invested in game companies, launched H5 casual game platform "Meitu Game Box" and female mobile game "Meimei Shop"; also set up beauty e-commerce platforms, trying to get a share of the new consumer retail sector. However, these "side businesses" are rarely mentioned in Meitu's financial reports, and almost all of them ended in disgrace.
Since 2019, Meitu's main revenue pillar has changed from "smart hardware" to "online advertising" again, and it mainly relies on its Meitu Xiuxiu, Beauty Camera and other products to earn advertising fees and membership fees. According to the financial report, the number of monthly active users of Meitu's applications is 257 million. In the first half of this year, Meitu (1357.HK) had a total revenue of 1.62 billion yuan, a year-on-year increase of 28.6%; of which, advertising revenue was 410 million yuan, a year-on-year increase of 18.3%, accounting for 25.5% of the total revenue.
It is worth mentioning that Meitu's previous "cross-border speculation in cryptocurrencies" is closely related to co-founder Cai Wensheng. While serving as the chairman of Meitu, Cai Wensheng is also an active angel investor and has long been interested in blockchain and digital currencies. As early as 2014, he invested in the cryptocurrency exchange OKEx. Cai Wensheng publicly stated in 2021 that Meitu will continue to deploy blockchain, and the purchased cryptocurrencies such as Ethereum and Bitcoin will serve as the value reserve for Meitu's long-term development of blockchain strategy.
Under the influence of Cai Wensheng, Meitu's affiliated companies have long been involved in the blockchain industry, invested in blockchain companies, and were involved in the ICO storm. Purpose BEC (US Dollar) was once considered to be a blockchain project under Meitu.
However, Cai Wensheng resigned from all positions in Meitu in June 2023, and founder Wu Xinhong (Wu Zeyuan) took over as chairman; Wu Xinhong helped Meitu avoid many detours in the AIGC era, and clearly put forward the strategic goal of "productivity and globalization".
After the sale of cryptocurrencies, the board of directors of Meitu plans to use approximately 80% of the net profit from the sale as a special cash dividend at a price of approximately HK$0.109 per share; and according to Meitu’s 2024 semi-annual report, as of the end of June this year, the number of Meitu shares directly and indirectly held by major shareholder Cai Wensheng was 1.068 billion shares. Based on this calculation, he can receive a dividend of approximately HK$116 million (approximately RMB 108 million).
It is worth mentioning that one day after Meitu announced the sale of all virtual currencies, on December 6, the price of Bitcoin began to dive rapidly, once falling below $90,000 per coin.
Wang Peng, an associate researcher at the Beijing Academy of Social Sciences, believes that Meitu's decision to enter the Bitcoin market that year was quite bold, which may be due to Meitu's keen grasp of market trends and its search for new growth points; Wang Peng also said that when the price of Bitcoin rose sharply, Meitu chose to sell all cryptocurrencies, which can be understood as the company's rational choice in the current market environment, which not only reduced risks but also achieved capital repatriation.
In the announcement of the sale of cryptocurrencies, Meitu also mentioned that the remaining net profit from the sale of cryptocurrencies will be used as general working capital to expand the Group's imaging and design product business, which is mainly based on paid subscriptions.
Bai Wenxi said that this means that Meitu will further return to and strengthen its main business, and increase the research and development and commercialization of its core business.
In fact, after selling its mobile phone business, Meitu has been exploring new growth points for its main business. In the past two years, the paid business of imaging products has become the mainstay of Meitu's revenue, accounting for nearly 60% at one time.
Among them, the rapid growth of paid revenue is inseparable from the support of AI technology. Now it seems that the investment and layout of AI is probably the most valuable investment in Meitu's original diversified layout. According to "Fun Business", Meitu's ability to learn AI in depth began in 2013, and it once launched "hand-painted selfie" with the prototype of AIGC. Before the outbreak of the big model trend, Meitu mentioned in its financial report that it valued the function of AI technology to assist in photo editing.
In 2022, Meitu added AI functions to its "Meitu Xiu Xiu" and "Meiyan Camera", and also launched the short video beauty tool "Wink". In the first half of this year, Meitu had about 10.81 million active paying users, and the increase in the number of members of these three applications contributed 81% of the overall membership increase.
Following the release of the self-developed Qixiang Big Model in 2023, Meitu has been improving the AI creation capabilities of these three main APPs. Wu Xinhong, the founder of Meitu, once mentioned at the performance meeting that AIGC products have significantly improved the conversion of subscriptions, and AIGC capabilities have become the core of Meitu's business.
Currently, Meitu Xiuxiu can use AI to remove pedestrian debris, remove text, increase height and shape with one click, and can intelligently beautify photos based on user-provided photos. In terms of cutouts, it can already compete with more professional photo editing software; however, for the popular "text image" function, Meitu Xiuxiu's experience is very limited.
"Fun Business" observed that Meitu Xiuxiu's text images have very few options for size and style, while similar AI applications such as Zhipu Qingyan and Doubao have text images that not only have more styles to choose from, but also support detailed design such as light, lens and composition.
Some users have said that Meitu Xiuxiu's AI text-generated pictures and AI-enlarged pictures can only reflect part of the text description, and the effect is not accurate enough. This also means that the current Meitu Xiuxiu may not be able to cover the audience groups with a large number of drawing needs such as designers and media people.
In addition, many users have complained about the function of "automatic renewal after 7 days of free membership" of Meitu Xiuxiu. Many users complained that “after the trial membership, the annual membership was activated by default, and 128 yuan was directly deducted.” “Beware of Meitu’s automatic renewal! If you don’t check the payment software, you won’t even know that you have been deducted.”
Many users also mentioned that they cannot manage facial files without a membership in Meitu XiuXiu, “I can’t even decide my own personal information, and I can’t delete it even if I want to.”
According to "Qujie Business", Beauty Camera is the second most popular application under Meitu, focusing on taking photos, and also has AI matching hairstyle and makeup, and AI smart retouching functions. In the past year, the most discussed feature of Beauty Camera outside the site is the "AI photo" function that became popular last year. It is regarded as a "money-saving savior" by many users who are in urgent need of ID photos. For 8.8 yuan, you can unlock the classic ID photo template.
However, many users feel that the other AI photo styles of BeautyCam are not realistic enough; some netizens said, "The photos generated by BeautyCam AI do not look like the real person, not as good as Qingyan and Xingtu, and they have to pay."
It is foreseeable that with the development and application of AI technology, Meitu's competitors will no longer be just photo editing software; in the future, in an era where glasses can take photos, AI assistants will inevitably invade Meitu's hinterland.
Bai Wenxi believes that as the functions of text-generated images and image-generated images are gradually iterated and improved, AI text-generated image applications such as Stable Diffusion and Midjourney have posed a challenge to the aesthetics that Meitu has always been proud of; in addition, the optimization of the "text-generated image" function of AI tools such as Doubao and Zhipu Qingyan may lead to the loss of users of Meitu Xiuxiu and BeautyCam.
According to Meitu's 2023 interim report data, the number of monthly active users of Meitu Xiu Xiu and Beauty Camera were 130 million and 52 million respectively. After that, Meitu no longer announced the monthly active numbers of its applications separately; however, QuestMobile data showed that in May this year, the monthly active user scale of Meitu Xiu Xiu and Beauty Camera was 100 million and 47 million respectively, both of which decreased compared with last year.
In addition to Meitu Xiuxiu and Beauty Camera, "Wink", which focuses on short video beauty, has also become the third largest application under Meitu this year, achieving a 99% year-on-year monthly active growth in the first half of the year.
Wink is a video tool launched by Meitu in 2022, which is also monetized through advertising and membership. Wink's basic editing and color adjustment functions can be used for free, but more sophisticated matting and resolution repair require membership; Wink's membership price is equivalent to Meitu Xiuxiu, and the annual subscription is 168 yuan.
It is worth mentioning that in September this year, after WeChat Moments officially supported Live Photos, Wink quickly ranked third in the App Store China region. In the eyes of many domestic users, Wink is the "video version of Meitu Xiuxiu"; some users also said that Wink is competent for simple portrait beauty and image quality repair, but if you want to do more sophisticated processing, Wink is not enough, and finally you have to use more professional editing software such as AE.
In addition, Wink's monthly active growth also comes from overseas. Meitu mentioned in its financial report that Wink's monthly active growth in countries and regions outside of China has far exceeded that of mainland China. Recently, Meitu Xiuxiu has also topped the App Store charts in overseas countries such as Indonesia and Thailand, mainly due to the popularity of AI functions on social media.
According to "Fun Business", in the first half of this year, Meitu's monthly active users reached 258 million, a year-on-year increase of 4.3%; among them, the monthly active users in the mainland decreased by 0.2% year-on-year, but the monthly active users in countries and regions outside the mainland were 84 million, a year-on-year increase of 15%, accounting for 32.9% of the total monthly active users.
Lin Xianping, Secretary General of the Institute of Culture and Creativity of Zhejiang City University, believes that whether Meitu can maintain its current growth rate overseas depends on many factors. First, the development trend of globalization and digital economy will continue to affect the usage habits and market demand of digital tools; second, the strength and market strategy of competitors may have an impact on Meitu's overseas growth; in addition, users' demand and preference for mobile photography and image processing may also change. "In the future, we still need to observe the changes in the market environment and user needs to determine whether Meitu can maintain its current growth rate overseas."
In addition to C-end business, Meitu's To B business in the past two years has also been exerting its strength. On the one hand, Meitu provides AI skin analysis solutions and ERP systems for medical beauty brands; in addition, Meitu has launched production tools "Meitu Design Studio" and "Qimi" for the e-commerce and game advertising industries respectively. In addition to content production, Qimi can also solve the entire process from production to delivery for users in one stop. In the first half of this year, the monthly active users of "productivity" tools such as Meitu Design Studio increased by 42% year-on-year, much higher than the growth rate of "life" Meitu tools such as Meitu Xiuxiu.
Today's Meitu is more focused on its core business and is no longer the "unprofessional" Meitu. Chen Jianyi, senior vice president of Meitu Group, once said, "Meitu has been chasing various trends for a while and has done a lot of businesses that we are not good at, such as e-commerce, medical beauty, and blockchain, which has caused great damage to the company."
Chen Jianyi believes that the biggest lesson learned from the past is to do what you are good at. "Since Meitu is good at making tools, let's make AI tools to the extreme." In Chen Jianyi's view, AI can at least bring the company revenue of 10 billion yuan; at present, Meitu is still some distance away from this goal. New technologies bring new opportunities as well as new challenges. It is worth continuing to pay attention to how Meitu can leverage its strengths to meet the segmented needs of more users and respond to the challenges of various AI applications.
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