China’s struggling selfie king Meitu finally has a profitable year

Beauty filter app maker Meitu reports full-year profit for the first time after going public in Hong Kong in 2016, driven by growth in membership subscriptions
Meitu has ventured into smartphones, e-commerce and social networking, and is now investing in cryptocurrencies

Meitu

Xinmei Shen

Published: 5:00am, 27 Mar 2021

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Meitu, the maker of one of China’s most popular selfie apps, has struggled for years to make money despite various attempts to diversify its business, but on Thursday, the Hong Kong-listed company posted its first full-year profit since it went public in 2016, driven in part by soaring membership subscriptions.

The Xiamen-based company reported a net profit of 60.9 million yuan (US$9.3 million), with revenue growing 22.1 per cent year on year to 1.19 billion yuan in 2020.

It marks a major turnaround for the long-struggling company, which reported a net loss of 190 million yuan in 2019.

Meitu, which means “beautiful pictures” in Chinese, creates apps that let users remove blemishes, enlarge their eyes, slim their faces and bodies, and put on virtual make-up in their photos.

Two models take a selfie with a Meitu smartphone during the company’s initial public offering press conference in Admiralty, Hong Kong, on December 16, 2016. Photo: Dickson Lee

The firm’s flagship app, also called Meitu, has been a huge contributor to China’s selfie culture since its release in 2008. It also briefly became a hit in the US in 2017 after comedian Stephen Colbert, Captain Marvel actress Brie Larson and other celebrities shared their heavily-edited Meitu makeovers on social media.

Although the fad quickly faded in the West as users started raising privacy concerns over the amount of personal data that the app was asking from their smartphones, Meitu remains an essential tool for millions of selfie lovers in China.

Despite the popularity of its apps, though, Meitu had struggled to turn a profit, even after various attempts to venture beyond its core business.

For a while, Meitu produced a line of candy-coloured smartphones featuring large selfie cameras. In 2018, it struck a deal with gadget giant Xiaomi to churn out Meitu-branded handsets as it scrambled to keep a foothold in China’s cutthroat smartphone market.

The product line was discontinued in 2019, and on Thursday, Meitu announced that it had ended its partnership with Xiaomi.

Meitu’s attempt at e-commerce also fizzled out. Meitu Beauty, an app designed to analyse users’ skin conditions based on their selfies and recommend suitable products, shut down in 2018.

Efforts by Meitu to transform itself into a social platform with an Instagram-like photo-sharing feature have yet to make a dent.

The company’s stock price has tumbled by more than 80 per cent from its peak in March 2017, closing at HK$2.49 (US$0.32) on Friday.

02:14

China's biggest selfie app wants to beautify people in real life

Ultimately, it was Meitu’s bread-and-butter selfie apps that helped the company deliver its first profitable year. Some of the company’s biggest growth in 2020 came from subscriptions and in-app purchases, which saw revenue rise 140 per cent year on year to 206.5 million yuan (US$31.6 million).

Meitu said it first rolled out subscription services on its overseas apps, AirBrush and BeautyPlus, in 2019. After initial success, it added the feature on its domestic apps in the second half of 2020.

Users of the Meitu app can pay to get rid of advertisements and use a range of member-only stickers and filters. In China, monthly and annual subscriptions cost 12 yuan and 98 yuan (US$1.83 and US$14.98) respectively.

The company said that by December 2020, it had more than 1.7 million paying subscribers across its domestic and overseas apps.

Meitu’s other revenue streams took a hit during the Covid-19 pandemic, however. Online advertising, which accounted for more than half of Meitu’s revenue, saw a 9.5 per cent decline.

Two models pose for photos at the launching ceremony of the Meitu M4 smartphone in Beijing, China, on April 8, 2015. Photo: Simon Song

The company’s monthly active users also fell 7.6 per cent from roughly 282 million in 2019 to 261 million in 2020.

The company said it was largely because of India’s ban on Chinese apps, which started last June following a deadly military clash at the Chinese-Indian border.

Since then, hundreds of Chinese apps have been removed from Indian app stores, including Meitu. However, Meitu’s annual report showed that its monthly active users in mainland China also dropped 6.1 per cent.

Meitu has recently diversified its investment strategy by purchasing cryptocurrencies. It announced earlier this month that it had bought US$22.1 million worth of ether and US$17.9 million worth of bitcoin, calling them a potentially “superior form to other alternative stores of value such as gold, precious stone and real estate”.

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