Zhihu Aims for Profitability Amid Revenue Headwinds

China’s largest Q&A platform, Zhihu (NYSE: ZH, SEHK: 2390), is bracing for a challenging 2024 as its main revenue streams—advertising, content commerce solutions (CCS), and paid memberships—face slowing growth. Advertising, which accounts for 20% of Zhihu’s total revenue, is expected to decline by -56% year-over-year as the platform scales back its ad strategy to sharpen its focus on margins. Meanwhile, paid memberships, Zhihu’s largest segment, is forecasted to dip -4%, and CCS revenue is projected to fall -14%. User engagement is also in flux, with monthly active users (MAUs) set to fall -18% from last year to around 86 million, highlighting potential challenges in monetizing the user base.

Despite these headwinds, Zhihu, often dubbed “China’s Quora,” is steadily moving toward profitability. Visible Alpha consensus estimates indicate that the company’s net loss is expected to narrow to $4 million in Q4 2024 from $9 million the prior quarter and $38 million a year earlier. By 2025, analysts forecast Zhihu will reach net income profitability, with an estimated net income of $8 million.

Zhihu’s shift towards high-quality content is central to its strategy. In June, the company launched an AI-powered search tool, Zhida, initially available on PC, with a mobile version in the works. Zhihu is also expanding its membership benefits, adding premium content like audiobooks and radio dramas, while exploring co-branded memberships and distribution partnerships to attract new users.

Despite these efforts, Zhihu’s cost-management focus—which has included scaling back on R&D and marketing—has constrained its top-line growth. As initiatives like the AI-driven Zhida mature, Zhihu’s revenue recovery may depend on how successfully it can monetize these ventures.