Meitu to focus on internet services, social media for higher revenue

Selfie application maker Meitu Inc is accelerating its monetization efforts through paid subscription, audio streaming, virtual makeup and other internet value-added services as the company is shifting to an asset-light business model after licensing its hardware business to smartphone heavyweight Xiaomi Corp.

Industry insiders said Meitu has adjusted its strategy and is concentrating on social media and internet services to garner higher margins, boost advertising revenue and enhance user engagement.

The company reported its total revenue dropped by 4.7 percent to 464 million yuan ($64.7 million) in the first half of 2019, while its net loss declined 41.4 percent to 171.7 million yuan compared with the same period last year.

Wu Xinhong, CEO of Meitu, said the company will pay more attention to its core product - beauty enhancing photo app Meitu Xiuxiu, and make a breakthrough in the social media sector, with its short-video app Meipai, which targets female users aged 25 to 35, being part of the ecosystem.

"Revenues from paid subscriptions, such as virtual products with special effects and intellectual property branded augmented reality filters, have grown more than six times year-on-year in the first half of this year, becoming the fastest growing sub-segment within the internet value-added services and other business," Wu added.

The paid users are mainly from the United States, Japan, and Brazil. Users from India and Southeast Asia have also grown rapidly, the company said.

Wu said the company will launch more products with social interaction functions, such as the private album where users can store their photos securely in the cloud. The function enables them to invite friends to manage an album together where they have the ability to upload, comment and interact with each other.

The company's interim results showed revenue from the online advertising business rose 27.2 percent to 362.3 million yuan. In June 2019, Meitu app's users spent over 12 minutes per day on average, from approximately 5 to 6 minutes per day prior to the transformation.

Meitu has stripped off its e-commerce and smartphone businesses. Last year, Meitu and Xiaomi reached a strategic cooperation arrangement. Xiaomi will be responsible for the design, research and development, production, business operation, sales, and marketing of Meitu smartphones, while Meitu will provide its proprietary imaging technologies and beautification algorithms.

"Meitu doesn't have an upper hand in the e-commerce and smartphone segments, which are not highly relevant to Meitu's core photo-editing business, so its shift to an asset-light business model is appropriate," said Lu Zhenwang, CEO of Shanghai-based Wanqing Consultancy.

Lu said Meitu should focus on social media to increase user engagement and data flow, which is the foundation to implement its monetization strategies.

Founded in 2008, Meitu's apps had gathered about 308.1 million monthly active users by June. The apps help them appear more attractive in photos and videos by slimming their faces, buffing their skin and even applying makeup.