China’s rising “She Economy” fuels Meitu ambitious fund-raising plan in Hong Kong

Selfie app maker looking to raise as much as US$1 billion from its initial public offering in city

PUBLISHED : Tuesday, 23 August, 2016, 7:50pm
UPDATED : Tuesday, 23 August, 2016, 10:55pm

Meitu, China’s most popular selfie app maker, is planning to raise up to US$1 billion through an initial public offering in Hong Kong, which if successful could be one of the biggest IPOs in the city this year.

Beautifying selfie apps have gained popularity in China as a growing number of Chinese women are using apps to whiten skin, make eyes bigger and enhance other facial features in their quest to stay beautiful and stay connected. More importantly, the success of such apps also mirrors the rise of China’s ‘She Economy’, analysts said.

Meitu, which also sells smartphones under the same name, was a tech startup established by Cai Wensheng in 2008.

According to media reports, the company plans to raise US$500 million to US$1 billion through the share sale. In its filing to the Hong Kong Exchanges & Clearing on Monday, the company said it raised US$136 million in a Series D funding round earlier this year.

A billion downloads has Chinese selfie app maker Meitu looking good – but will its idea of beauty translate globally?

Meitu’s flagship selfie app Meitu Xiuxiu is a simple-to-use free photo editing and sharing tool, with one-touch beautifying features including skin whitening, eye enlarging, and jawline thinning. The effect is so dramatic that users seem to have had a plastic surgery.

Chinese women are the driving force for the so-called ‘She Economy’, which has great potential
Zhang Fan, analyst, Zhongtai Securities

The popularity of the app can be gauged by the number of users it has in China. According to company data, Meitu Xiuxiu had been installed in 900 million mobile devices by October 2015, with 270 million monthly active users and 52 million daily active users. Meitu’s revenue increased more than fivefold from 86 million yuan (HK$100.4 billion) in 2013 to 488 million yuan in 2014, and grew further by 50 per cent year-on-year to 742 million yuan in 2015. Currently, its revenues mainly come from built-in-app ads and sales of self-made Meitu phones.

“Chinese women are the driving force for the so-called ‘She Economy’, which has great potential,” said Zhang Fan, an analyst with Zhongtai Securities.

Women are “leading the new age of consumption”, as e-commerce is growing at a rapid clip in China, he said.

About 80 per cent of Chinese household consumption is decided by women, including expenditure on eating and drinking, education and cultural activities, and travel, according to a recent report from Tongbanjie, a Chinese online financing platform. It said that during the past three decades, the average income of Chinese women has grown by 63 per cent.

'We should all take selfies': Chinese smartphone maker Meitu unveils new M4 selfie phone

Female Internet users have grown from 290 million in 2014 to 356 million in 2015, a separate survey from Analysys, a market research firm, showed.

Among female Internet users, it is the photo-editing and social photo-sharing apps that are extremely popular. By January this year, photo-editing and sharing apps were among the top 3 in terms of popularity with female mobile Internet users, after health care and online shopping apps, data from Analysys showed.

With rising income levels fuelling the growth of such apps, analysts believe that Chinese women are now more keen than ever about their appearances - both in the real and virtual world. Most of them see the online platform as a tool to express and identify themselves, they said.

Yin Yanji, deputy director of Minsheng Securities’ research division, said in a recent report on China’s She Economy that “the woman’s era has risen in China, as mobile Internet has liberalised women and let them express themselves more freely and communicate with others on social networking sites.”

At the same time, women also have higher expectations about themselves due to peer pressure on social media.

“ Women care much about their looks and what other people think of them, ” Zhang from Zhongtai Securities said.

“They like sharing on social spaces and have a tendency to show off and are easily influenced by peers on social media,” he said.

Beautifying selfie apps like Meitu fit this trend. However, they also face the challenges of how to turn the soaring number of users into cash.

According to Meitu’s application, it has been suffering losses since its establishment. The company reported a loss of 2.2 billion yuan for the first half of this year and said it expects to break-even by next year.

Celeb and model-studded M4 smartphone launch shows Meitu's social media savvy

Zhang Wei, chief technology officer for Meitu, said in June that the company plans to grow revenue by increasing advertisements, making mobile games, and developing e-commerce through cosmetic brand recommendations to users.

Yin from Minsheng Securities said that beautifying app makers should grab users’ attention by building and growing an active online community that discusses beautifying topics, provides online shopping guides, or connects app users to shopping sites and beauty service providers.

business-article-page