Can Meitu cash in on its popularity to make a profit?

Photo credit: Nhat-Tien Le.

The social feeds of Twitter and Instagram users have been flooded with cute animated photos of Donald Trump, Hillary Clinton, and a slew of celebrities in the past few days. It seems there’s been a photo-editing frenzy on social media. The animated photos, featuring exaggerated sparkling eyes, slimmed chins, and airbrushed pink skin, were all created via Meitu, a killer photo-editing app from China.

Meitu’s ranking on Apple’s App Store free app list soared in just two days from 418 on January 17 to 17. The app’s stock price also saw a 7-percent increase in a week, pushing it to a new record after its IPO in December.

Meitu Inc., the company behind the app, nailed a US$629 million listing last month on the Hong Kong stock exchange at a valuation of US$4.6 billion.

Many people were bewildered at how essentially a purveyor of free apps was able to go public without having to first post profits. And many continue to be confounded by the biggest challenge confronting the newly listed company—turning a profit.

To address these concerns, here’s a dissection of Meitu, including an analysis of its products, operating status, and how it plans to diversify its business in the future.

A company built around solutions for selfie addicts

Unlike most internet startups that found their homes in Beijing, the most dynamic hub for the internet industry in China, Meitu Inc. is located in the southeastern coastal city of Xiamen, Fujian. It was established in 2008 by two serial entrepreneurs, present CEO Wu Xinhong and chairman and angel investor Cai Wensheng.

Cai is a legendary grassroots entrepreneur and angel investor in China who made his name as the domain name trader that sold G.cn to Google. Led by Cai, the company has completed five rounds of fundraising since launch, landing itself US$501 million in total from famed investors, including venture funds IDG Capital China and Sinovation Ventures.

Apart from its glamorous founder and investors, what’s more eye-catching is its eight-year expansion of product line that has landed the company a staggering 110 million registered users (as of last October according to its prospectus), pumping out over 6 billion photos online every month.

It all started with the Meitu app in 2008. The app was originally a desktop photo editor that later became one of the flagship mobile apps for the company. It gained ground quickly by selling itself as a photo editing tool “100 times simpler” than the industry standard Adobe Photoshop.

Unlike Google’s photo-editing app Snapseed and its standard filter set, the most popular functions for Meitu are touch-up effects: eye widening, skin lightening and smoothing, and face slimming. Its ease of use and one-touch beautifying features made the app a darling for millions of users, mostly women, in China.

Its instant success also inspired the direction of the company: building products around the theme of “beautifying,” targeting young female users. It has since bred 23 products that include a photo-editing application, a short video and live streaming platform, and even a mobile gaming app. The following are the six flagship apps of Meitu Inc.

An app developer that makes 90 percent of its revenue from selling smartphones

How do you cash in on all this popularity?