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l  Zhihu’s original reputation, that being a serious/elite forum, restricts its expansion through more entertainment content or a wider user group.

l  The unsuccessful expansion also creates issues to Zhihu’s monetization and profitability potentials.

l  Monetization will face more challenges into 2H21 due to weak online ads market and more regulatory issues.


Two key figures are not promising

According to Questmobile, although Zhihu keeps fair growth in total user growth (DAU 11.7% YoY in 1H21), its average user time spent declined by 7% YoY in the same period, Zhihu’s active user 7-days retention declined from 57% to 51%.


Competition with short-video platforms is a key issue

Major short video platforms all announced plans to support knowledge-related video content. Zhihu tries to catch up, but the amount of viewership is not satisfying. The increasingly competitive pressure from short-video platforms leads to drainage of Zhihu’s top content creators.


Monetization potential is doubtful

Zhihu’s online literature membership content is not comparable to those of other online literature platforms, like ones belonging to Yuewen or Bytedance. Online literature is also not compatible to Zhihu’s position as a question-answer platform. “Zhi+” should also be seen as a ads, so Zhihu’s total ads load already reached 12%-13% in 2021, similar to peers. Conversion results of Zhihu ads are not satisfying, per our channel check, because Zhihu users in general are critical about commercial ads.


MAU growth is accompanied with other metrics’ sacrifices

Although our MAU forecast is in line with company’s guidance to be 300 mn by 25, or 31.7% CAGR from 21-25, we estimate that Zhihu’s DAU/MAU ratio, revenue growth, and margin will weaken. We estimate that Zhihu’s DAU/Rev. will have 25.6%/45% CAGR from 21-25, and net margin will reach 17% by 25.

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