After becoming profitable, Kuaishou continues to reduce costs and increase efficiency while expanding monetization scenarios.

The financial report released on August 20th shows that Kuaishou's total revenue in the second quarter increased by 11.6% year-on-year to RMB 31 billion, with an adjusted net profit of RMB 4.68 billion. Both gross margin and adjusted net profit margin reached new quarterly highs of 55.3% and 15.1%, respectively.

User activity remains a relatively stable aspect of Kuaishou's performance. In Q2, the average daily active users (DAU) of the Kuaishou app increased by 5.1% year-on-year to 395 million, while the average monthly active users (MAU) increased by 2.7% year-on-year to 692 million. Community ecosystem optimization and vertical hotspot marketing ensure a positive flow cycle on the platform. In Q2, both the average daily usage time per DAU and the total usage time increased. The Olympic Games hotspots and AI application advancements in Q3 will continue to maintain this cycle.

With a stable user base, changes have always occurred in the commercial landscape.

In terms of main business segments, online marketing services accounted for 56.5% of total revenue, live streaming for 30.0%, and other services for 13.5%. Live streaming, once considered Kuaishou's core business, continues to decline, with Q2 revenue falling by 6.7% year-on-year to RMB 9.3 billion, though this represents an improvement from the previous quarter's 8% negative growth. Introducing high-quality new guilds and promoting diversification of live streaming formats have become the main transformation directions for this business following proactive rectification, particularly for new businesses like KuaiPin that leverage live streaming.

Most internet platforms are experiencing the anxiety of approaching user traffic ceilings. While platforms like Kuaishou, situated in the short video dividend zone, still have room for growth, they are also proactively adjusting their business models to improve traffic utilization efficiency. In addition to the continued pursuit of stability in e-commerce, the second growth curve, new businesses such as local services and KuaiPin will gradually take center stage.

01. Advertising Efficiency Improvement and E-commerce Enhancement

In Q2, online marketing service revenue increased by 22.1% year-on-year to RMB 17.5 billion. The financial report specifically highlights the contribution of tool optimization to revenue growth. The external marketing product Universal Auto X (UAX) provided customers with higher-quality marketing services, with total UAX marketing spending accounting for over 30% of total external marketing spending in Q2.

Kuaishou's financial reports for several consecutive quarters have explicitly mentioned the revenue contribution from short videos. This genre inherently suits the platform's strengths: Sinking content , fast-paced narratives, and fragmented consumption. Furthermore, the platform can serve as both a producer and a channel, spanning the upstream and downstream of the industry chain to monetize content through various means.

In the first half of the year, Kuaishou created a native link for paid short videos, allowing users to pay and watch short videos within the Kuaishou app to enhance the consumption experience and increase user spending. However, the prospect of content monetization through paid content on the C-end is not stable, and short videos are a genre with a high content iteration frequency and rapidly changing audience preferences. Securing ad spend and brand collaborations on the B-end may be a more sustainable model. Therefore, optimizing the aforementioned link is more critical in improving ad spend efficiency and business conversion rates for marketing clients.

In Q2, the number of paid short video ad clients on Kuaishou increased by over 300% month-on-month, and the number of short videos with ad spend increased by over 30% month-on-month. Meanwhile, Kuaishou's premium short video brand Xingmang Short Videos secured repeat brand sponsorships, including Tmall, and its merchant revenue increased by over 20 times year-on-year.

The performance of internal advertising is also evaluated in conjunction with other services (e-commerce). In Q2, other service revenue increased by 21.3% to RMB 4.2 billion, and e-commerce GMV reached RMB 305.3 billion, up 15.0% year-on-year. However, GMV growth slowed compared to previous quarters.

In a previous 618-related article, "New Position" mentioned that during the mid-year promotion, Kuaishou had the longest promotional period among major e-commerce platforms, but its GMV performance did not match its efforts. During the conference call, management attributed this to a slowdown in short-term domestic consumer demand and weakening traffic dividends, emphasizing that the focus of e-commerce remains on balancing content and commercial efficiency.

This pursuit of efficiency is primarily reflected in incentives for merchants on the supply side. At the E-commerce Gravity Conference in May this year, Kuaishou highlighted several incentive policies aimed at new merchants, including traffic allocation, live streaming cold start support, and follower growth rewards.

Additionally, the more demanding and "heavy" sales trusteeship functions have been launched, including brand commodity commission trusteeship and white-label commodity pricing trusteeship, aimed at reducing operational difficulties for merchants and increasing sales certainty. As a result, the average monthly number of active merchants in Q2 increased by over 50% year-on-year.

Amidst the saturation of live streaming e-commerce penetration, both Douyin and Kuaishou have actively transitioned to a broader shelf model since last year. In addition to enriching supply, there are also interconnections between businesses. For example, the financial report mentioned in Q2 that the "watch and search" function in content fields was optimized, introducing a single-column style in search results to improve human-product matching efficiency and strengthen the broader shelf mindset. However, this transition still requires time. In Q2, Kuaishou's broader shelf e-commerce GMV accounted for over 25% of total GMV, roughly the same as the previous quarter.

Currently, both content-based e-commerce and shelf-based e-commerce are deeply penetrating each other's territories, eliminating the possibility of complete dislocated competition. All players are vying for similar user mindsets, such as low prices and service. However, the overall e-commerce industry trend is also changing, with Taobao and Douyin successively retreating from emphasizing low prices and focusing more on GMV. Evaluating platform competitiveness has thus become a complex proposition.

Fortunately, Kuaishou's e-commerce positioning and direction are now clear. With live streaming e-commerce as its foundation, Kuaishou is refining its core value amid industry penetration saturation pressure. Ahead lies the broader and more potential broader shelf field, corresponding to fiercer and more subtle industry competition.

02. Collective Momentum of New Businesses

Many of Kuaishou's new businesses have been in the works for a long time and operate relatively low-key, but in the second quarter of this year, local services and KuaiPin saw frequent activity, demonstrating the potential of new transaction scenarios to the outside world.

Kuaishou's local services progress follows a clear trajectory. Before being upgraded to an independent business unit in 2022, it was merely an independent section within the app, collaborating with takeout and OTA platforms like Meituan. Following the integration and upgrade, pilot cities were gradually deployed, creator incentives were introduced, and operating rules were refined.

This year saw several significant advancements. First, at the Local Services Convergence Ecosystem Conference in March, Kuaishou announced plans to invest billions in platform subsidies and traffic for group buying marketing, aiming to support 1,000 brands with GMV exceeding RMB 100 million. Additionally, the "food delivery to home" function was tested in the same month.

Another recent development was the announcement of a renewed three-year strategic cooperation agreement with Meituan, expanding the scope of cooperation to tens of thousands of stores in hundreds of cities nationwide and deepening it to include various marketing formats beyond group buying, such as vouchers, product memberships, and flash sales.

Due to the high supply chain barriers, local services are a more challenging business to penetrate, as evidenced by the prolonged competition between neighboring platforms. However, the complementary needs of Meituan and Kuaishou make their cooperation viable. Meituan has a mature supply and fulfillment system, while Kuaishou has influence in new-tier cities. Both can create "new customers" for each other, and leveraging Meituan's resources to expand Kuaishou's local services is a win-win scenario that accelerates growth. Currently, Kuaishou's local services business is still in the ecosystem-building phase.

KuaiPin aims for even greater reach. In May, the Ministry of Human Resources and Social Security announced plans to add 19 new occupations, including live streaming anchors and generative AI system operators, and 29 new job types, such as live streaming recruiters and lifestyle service experiencers. Live streaming recruiters will officially be included in the "Classification of Occupations in the People's Republic of China.""

Meanwhile, at a summit held last month, KuaiPin elaborated on its future plans for this business, including encouraging content management, providing intelligent tools, and enhancing the certainty of recruitment outcomes. Upgrading live streaming job postings to content-based recruitment signifies a more mature commercial positioning for this monetization scenario, which was initially leveraged through live streaming. In Q2, the average daily number of resume submissions for KuaiPin increased by over 130% year-on-year, and the match rate increased by over 150% year-on-year.

It is worth noting that KuaiPin can also be seen as an attempt by Kuaishou to "pivot" its live streaming business. Although proactive rectification has led to a strategic retraction in live streaming tipping income, there is still significant potential for extending live streaming technology and services to other industries. KuaiPin can connect to more diverse monetization forms, such as value-added services, advertising collaborations, or commissions, compared to previous live streaming tipping.

Profitability being the top priority, Kuaishou now needs a wider range of transaction scenarios and diversified monetization forms more than ever before.

03. Final Thoughts

Among the new variables, if short videos are entertainment products grown from Kuaishou's comfort zone, AI is anchored as a future-oriented technology reserve, with its functions intertwined in various businesses.

In June this year, Kuaishou released the AI video generation model "Keling," whose video generation time surpassed Sora's to reach 120 seconds, sparking considerable discussion both domestically and internationally. The outside world generally views this as Kuaishou's "muscle-flexing" in AI generation. While AI assistance will undoubtedly revolutionize content creation on platforms, there is still room for improvement in terms of cost, technology, and effectiveness. The application of large models in commercial scenarios depends more on whether they can enhance the efficiency of specific business scenarios.

According to the financial report, nearly 20,000 merchants used large models to optimize their operations on the Kuaishou platform in the first half of the year, and the daily consumption of AI machine marketing reached RMB 20 million in June this year. Bringing AI into production and workflows has already reached a considerable scale, and Kuaishou may explore more ToB collaborations in the future.

From a short video newcomer to an "AI-driven technology company," a comprehensive commercial landscape and technology integration are still needed to fill in the logic gap.

*Images in the title and article are sourced from the internet.