Meitu Profit Soars Fueled by AI Subscription Growth

Chinese photo-editing giant Meitu has announced a remarkable financial achievement, with its net profit for the first six months of the year already exceeding its total profit for all of 2023. This impressive growth is largely credited to the booming success of its artificial intelligence-powered subscription services.

A Look at the Stunning Financials

According to a financial report from the Xiamen-based company, Meitu's net profit surged by 30.8 percent to CNY400 million (USD55.69 million) in the first half of the year. This figure is a significant step up from the CNY370 million profit it generated throughout 2023. The company's revenue also saw a healthy increase, climbing 12.3 percent to CNY1.8 billion (USD250 million).

The primary driver of this growth was its imaging and design products, which brought in CNY1.3 billion (USD181 million), a 45.2 percent increase that accounts for 74 percent of total revenue. Despite the strong financial report, Meitu's stock price saw a slight dip, closing down 1.6 percent. However, this comes after the stock's value has quintupled over the past year, reflecting sustained market confidence.

The AI Subscription Boom

The secret to Meitu's success lies in its effective integration of generative AI. Chief Financial Officer Yan Jinliang noted that AI features address user pain points that traditional tools cannot, which has significantly increased people's willingness to pay for subscriptions. This is reflected in the numbers, with paid subscribers jumping by 42 percent to reach 15.4 million, pushing the subscription penetration rate to 5.5 percent.

Embracing a Startup Mindset for the AI Revolution

Founder Wu Xinhong emphasized that the AI revolution is reshaping the market, and Meitu must maintain a startup mindset to remain competitive. He believes that smaller, more agile rivals could pose a greater threat than larger corporations. In response, Meitu is aligning its operations with startup practices, focusing on strategic priorities and organizational agility while channeling resources into its core business.

The company's strategy is centered on "AI-driven productivity and globalization." This approach is yielding results, as monthly active users reached 280 million in the first half, with a notable 15.3 percent jump in overseas users, which now total 98 million.

Productivity Tools and a Strategic Alibaba Alliance

Meitu's productivity tools are also showing strong performance. The 'Kaipai' app saw its user base more than quadruple, and the number of subscribers for its productivity suite surged by 69 percent year-on-year to 1.8 million. Wu predicts that revenue from these tools could soon represent more than half of the company’s total income.

A recent CNY1.8 billion (USD250.7 million) partnership with e-commerce powerhouse Alibaba Group Holding is set to further accelerate Meitu's growth. Acknowledging that Meitu lacks the resources to develop foundational AI models, Wu stated that strategic partnerships are essential. The collaboration will leverage Alibaba's open-source Tongyi model, which integrates well with Meitu's specialized business needs. The two companies will work together on AI-powered virtual try-ons, e-commerce imaging tools, and cloud services, with Alibaba Cloud providing the necessary computing power.

A Two-Year Window of Opportunity

Wu believes the window of opportunity for generative AI is short, giving Meitu about two years to capitalize on the current trend. By leveraging its massive base of 280 million monthly active users, significant engineering investments, and deep expertise in visual aesthetics, Meitu is confident it can maintain its competitive edge in the rapidly evolving market.