FAST NEWS: Zhihu Posts Strong Paid User Growth in Second Quarter, But Ad Revenue Sags

The latest: Online Q&A site Zhihu Inc. (ZH.US; 2390.HK) on Tuesday reported its revenue rose 31% in the second quarter to 836 million yuan ($121 million), while its net loss widened to 487 million yuan from 321 million yuan a year earlier.

Looking Up: The company’s average monthly paying members grew 78.3% year-on-year to 8.5 million during the quarter, fueling a 75.1% jump in revenue from paid members to 271.2 million yuan. That shows the company is becoming more effective at monetizing its user base.

Take Note: The company’s advertising revenue, previously its largest revenue source, fell by 4.5% year-on-year to 237.6 million yuan. It blamed the decline on “headwinds faced by the general online advertising industry in China due to, among other things, the general economic conditions and the Covid-19 pandemic situation.”

Digging Deeper: Zhihu initially rose to prominence as an online knowledge-sharing site, with many dubbing it the “Quora of China.” As its popularity grew, the company began monetizing its large user base by offering paid subscriptions for premium services, as well as other paid services. Paid memberships surpassed advertising to become the company’s largest revenue source in this year’s first quarter. While the company has succeeded in diversifying its revenue, its losses continue to mount due to rapidly rising costs incurred during its revenue diversification drive.

Market Reaction: Zhihu’s stock fell 9% to $1.31 in Tuesday trade in New York after the results came out. The stock has lost three-quarters of its value since the start of the year, and is down 86% from its 2021 IPO price of $9.50.

Reporting by Doug Young

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