Xiaohongshu: China’s IG Rival Hits $1 Billion Profit
Xiaohongshu, the Instagram-style app that gained massive popularity among younger Chinese during the pandemic, is on track to double its profits to over $1 billion in 2024, sources familiar with the company’s operations revealed. This milestone signals a strategic shift from user growth to profitability as the app prepares for a potential market debut.
Pandemic Boom to Profit Focus
Xiaohongshu, meaning "Little Red Book," was founded in 2013 by Charlwin Mao Wenchao and Miranda Qu Fang as a shopping guide for Chinese travelers. Over time, it evolved into a multifaceted platform blending social media, product reviews, and live commerce. It now boasts 300 million monthly active users, making it a significant force in China’s digital arena.
The app surged during Covid-era lockdowns as millions turned to their phones for entertainment, shopping, and connection. By leveraging influencer-driven product recommendations, Xiaohongshu captured users' attention and streamlined purchasing — a model similar to ByteDance’s Douyin (TikTok’s Chinese counterpart). Users can discover products through photos and videos and purchase seamlessly with just a few clicks.
Competing with Giants
Xiaohongshu’s rapid rise has disrupted China’s e-commerce market, particularly at the expense of incumbents like Alibaba Group and JD.com. By combining influencer content with integrated e-commerce, the platform became a shopping and lifestyle hub for younger, trend-conscious Chinese consumers.
However, the broader slowdown in China’s economy has hit online commerce, with consumers curbing spending. Apps that boomed during the pandemic have since experienced slowing growth. Despite these challenges, Xiaohongshu’s renewed focus on profitability has kept it on track for its ambitious $1 billion target.
Investor Appeal and Potential IPO
The company, last valued at $20 billion in its 2021 funding round, counts Alibaba and Hongshan (formerly Sequoia China) among its major backers. The strong financial performance is expected to rekindle speculation about an IPO. While the company has not publicly announced plans, such a move could solidify Xiaohongshu's status as one of China’s few remaining privately held internet giants.
A Shifting Landscape
Xiaohongshu’s growth aligns with a broader trend in digital commerce, where platforms blend social experiences with shopping to drive revenue. This model has proven particularly appealing to younger demographics looking for curated, influencer-led content.
Although profitability is soaring, Xiaohongshu faces challenges from China's economic headwinds and slowing app growth rates post-pandemic. Nevertheless, with its innovative model and strong investor backing, Xiaohongshu is well-positioned to compete in China’s evolving tech and e-commerce space.
As the company moves closer to the $1 billion profit milestone, the market will closely watch its next steps toward a potential IPO — one that could reshape perceptions of China’s tech startups in a post-pandemic economy.
