Zhihu, which is known for its motto "Where there is a question, there is an answer," has once again shifted its focus back to answering questions.

According to the latest data released by SimilarWeb, a globally renowned website ranking and competitive data analysis platform, the visits to Zhihu Direct Answers in August this year reached 1.67 million, marking a 345% increase from the 375,000 visits in July.

Exploring generative AI technology has been a primary focus for Zhihu in the first half of the year. Following its success in "writing novels," Zhihu is now poised to craft a second, even more satisfying narrative centered on AI.

As Zhihu embarks on this new venture, the question of achieving profitability looms large and acutely over its head.

01

Revitalizing the 'Answering Questions' Core

In March of this year, Zhihu made its initial foray into AI search functionality, observing double-digit growth in both user engagement and retention rates for this new feature. In June, Zhihu Direct Answers was officially launched, with its visits continuing to surge, placing it at the forefront of AI product rankings both domestically and globally.

Currently, Zhihu Direct Answers has matured into a product that leverages authentic Q&A data from Zhihu's platform. When users search, they are presented with original Q&A links and an AI-generated, refined answer. These answers come in concise and in-depth versions, with most content sourced from Zhihu's Q&A section and a smaller portion referencing other relevant websites.

Screenshot from Zhihu Direct Answers

While Zhihu Direct Answers, as an AI search product under a large model, may lag slightly in terms of corpus richness and application scenarios compared to similar products, it takes on a distinct meaning within Zhihu's broader business landscape.

Since its inception, Zhihu has been rooted in question-and-answer and knowledge-sharing cultures. However, beyond these core values, Zhihu's external image has undergone constant evolution.

In its early days, Zhihu's slogans were "Discover a Bigger World" and "Share Your Knowledge, Experience, and Insights with the World." During this period, Zhihu positioned itself as a platform that attracted users with its breadth of knowledge, sophistication, and professionalism. Nevertheless, as users accumulated, content characterized by curiosity, fiction, and storytelling began to define Zhihu in the public eye.

Subsequently, Zhihu re-emphasized its Q&A capabilities, introducing the tagline "Where there is a question, go to Zhihu" and unveiling a new brand slogan, "Where there is a question, there is an answer," on its 10th anniversary.

In truth, Zhihu has never abandoned its roots in answering questions. For a long time, short stories were packaged within the context of real-life questions. While this approach may have maintained a narrow information bubble for some users, as Zhihu grew, the efficiency of content distribution and the operational capabilities of its Q&A products failed to keep pace, inevitably leading to a patchwork of disparate features.

Truly high-quality content that poses meaningful questions and offers insightful answers has struggled to reach a wider audience. The emergence of Zhihu Direct Answers, amidst the AI "leapfrogging" era, has preserved a spark for Zhihu, reuniting those genuinely seeking answers to their questions.

Through Zhihu Direct Answers, users can directly connect with content creators, expanding from a single question to entire fields of expertise, offering a significant incentive for creators of quality content.

While Zhihu Direct Answers has yet to contribute directly to Zhihu's commercialization efforts, it redirects the community culture, which has trended towards a more mass-market and accessible direction, back towards more cutting-edge discussions. In its 2024 interim report, Zhihu noted that it is the most extensive and in-depth internet platform for professionals to discuss AI-related topics. Concurrently, the number of related content creators has more than doubled year-over-year.

According to sources within Zhihu shared with Yuanmeihui, optimization efforts for Zhihu Direct Answers continue, with plans to upgrade the product's functionality, algorithms, and performance in the second half of the year. This includes the launch of a mobile version, the addition of multi-modal capabilities, and the exploration of more industry-specific application scenarios, all aimed at continually enhancing product features and user experiences.

Regarding the subsequent commercial operation of Zhihu Direct Answers and its integration plans with other business segments, Zhihu informed Yuanmeihui that no information is currently available for disclosure.

02

The Challenge of Achieving Profitability

As Zhihu Direct Answers accelerates its foray into the AI search landscape, Zhihu's commercialization efforts are also gaining momentum. Based on the first half of 2024 performance, Zhihu's path to profitability finally seems within reach after years of perseverance.

Although Zhihu's total revenue declined by 7.1% to RMB 1.894 billion in the first half of this year, from RMB 2.038 billion in the same period last year, its gross profit increased to RMB 1.1 billion from RMB 1.074 billion. Notably, the net loss for the entire half-year narrowed by 46.2% to RMB 246 million, down from RMB 458 million in the same period in 2023.

In the financial report, Zhihu's CEO Zhou Yuan highlighted the first half of 2024 as a crucial turning point for the company, marked by a series of tactical adjustments, including resource reallocation and organizational optimization. During a later earnings call, Zhou reiterated that Zhihu's goal of achieving profitability within the year remains unchanged.

Zhihu's commercialization is currently underpinned by three primary business segments: marketing services focused on B2B commercial advertising, "Yanxuan" paid memberships catering to C-end users, and vocational training.

The spending power of "Yanxuan" members is undeniable. Of Zhihu's total revenue of RMB 1.894 billion, paid memberships contributed RMB 882 million, accounting for 46.5% of the total. Moreover, "Yanxuan" serves as a potent tool for acquiring new customers, with Zhihu's average monthly subscribers growing from 5.1 million in 2021 to 14.7 million in the first half of 2024.

Screenshot from Zhihu's interface

However, in terms of monthly active users (MAUs), Zhihu's numbers have fluctuated, with MAUs reaching 95.9 million in 2021, 101 million in 2022, 105 million in 2023, and 84.8 million in the first half of 2024. New customers acquired through "Yanxuan" have not significantly boosted community engagement.

Nevertheless, Zhihu's latest interim report notes that user interactions and core user retention rates remain on an upward trajectory.

Vocational training and e-commerce currently contribute modestly to Zhihu's revenue, with e-commerce facing particularly intense competition in today's market.

Based on the current revenue structure, Zhihu's profitability relies heavily on membership fees and advertising income. However, the challenges of selling advertising on Zhihu have persisted for some time.

From 2021 to the first half of 2024, Zhihu's marketing service revenue decreased from RMB 2.135 billion to RMB 675 million. In its first-half financial report this year, Zhihu attributed the decline in marketing service revenue to the company's strategic focus on optimizing service offerings and enhancing profitability.

An investor familiar with Zhihu shared with Yuanmeihui that Zhihu is better suited for "seeding" campaigns in advertising and places greater emphasis on product categories.

"Some content may only thrive on Zhihu, such as annual CEO speeches from tech and digital companies. A platform's ability to offer incremental value to businesses across various dimensions is predetermined. Zhihu's commercial value necessitates qualifiers, positioning it as a platform that caters to content requiring longer, more in-depth narratives, albeit with less emphasis on direct conversions," analyzed the investor.

Despite the greater contribution from paid memberships, the investor noted that Zhihu internally remains more focused on advertising for its commercialization efforts.

Like other internet companies, Zhihu is actively pursuing cost reduction and efficiency enhancements. In the first half of 2024, its sales, research and development, and administrative expenses declined, while its workforce shrunk from 2,980 employees in the first half of 2023 to 2,181 in the corresponding period of 2024.

Since the advent of short videos, which have disrupted traditional image-and-text content, Zhihu's commercialization journey has been marked by a series of clashes between the "old" and the "new." As the community expands, maintaining an idealistic atmosphere while catering to a larger user base presents a daunting challenge, akin to trying to have one's cake and eat it too.

From a commercial perspective, Zhihu Direct Answers, which revives the core of answering questions, is tasked not with reverting Zhihu to its former idealistic state but with fostering a second growth trajectory by enhancing efficiency and stabilizing existing operations, all while avoiding the pitfalls of its earlier foray into video content.

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