Recently, the popularity of the Miaoyaxiangji has put the well-established AI team of Meitu Company in the spotlight within the AIGC field. For a while, netizens have been puzzled by the fact that Meitu Company, with its comprehensive AI team, has not released a viral ‘Miaoyaxiangji’.
It can be said that this year Meitu’s stock price has doubled, and AIGC has played an indispensable role. However, it is worth noting that in the past 8 months, Meitu’s stock price has also experienced a roller coaster-like trend with ups and downs. In the first half of this year, Meitu turned losses into profits, but the main reason was not its core business but the recovery of cryptocurrency prices from previous investments.
Over the years, Meitu’s business has been constantly changing. This time, Meitu’s founder, chairman and CEO, Wu Xinhong, is eager to seize the rare opportunity of AIGC and launch a product battle in order to embrace new growth opportunities.
In recent years, Meitu has been applying AI technology to its core business, and AI has become a vital tool for Meitu’s survival. In 2022, Meitu achieved growth in various aspects. According to the financial report, the monthly active users of Meitu reached 242.9 million in December 2022, an increase of 5.3% compared to the previous year. In 2022, Meitu’s VIP subscription business generated revenue of RMB 782 million, a year-on-year increase of 57.4%.
The company stated that the increase in monthly active users is due to the popularity of MeituPic’s AIGC-driven features in the fourth quarter of 2022. It was also during this year that Meitu launched a ‘App Sea’strategy, introducing six new imaging products including Chic Camera, Meitu ID Photo, Wink, MeituPic for Mac, Meitu Design Studio, and Meitu Cloud Editor.
And among them, AIGC-driven video editing application Wink was repeatedly emphasized in Meitu’s financial report. Meitu stated that Wink achieved significant growth in monthly active users in 2022. But another reality is that Wink did not achieve the same level of popularity as Miaoyaxiangji on social media.
However, Meitu has never stopped its exploration in the field of AIGC. Meitu stated that it will continue to invest in artificial intelligence and apply AI-driven features to image and video products. In addition, it will expand its productivity application products from meeting social/entertainment needs to meeting work-related demands.
In June this year, Meitu released a total of 7 new products: AI visual creation tool WHEE, AI voiceover video tool OpenShoot, desktop AI video editing tool WinkStudio, Meitu Design Studio 2.0 focusing on AI commercial design, DreamAvatar AI digital human generation tool; Meitu AI assistant RoboNeo and MiracleVision (Intelligent Imagination), a large-scale visual model by Meitu.
But so far, apart from Wink, Meitu’s applications have not gained popularity. Industry commentator Zhang Shule believes that Meitu has only modularized some complex Photoshop functions.
Regarding the explosion of popularity of the Miaoyaxiangji, Zhang Yueguang, the product manager, said that on one hand luck played a role, as there are currently few similar AIGC products. On the other hand, the value of such products is not a linear relationship; it only becomes commercially valuable when it reaches a certain tipping point. “We must achieve a score of 90 or above in terms of performance before launching this product,” Zhang Yueguang stated.
Since the beginning of this year, due to riding on the AIGC concept, Meitu’s stock price has doubled. However, at the same time, reporters have also noticed that Meitu’s stock price has been fluctuating throughout this year.
Several industry insiders told reporters that the lifecycle of a concept, from its proposal to hype and then to bubble, is a process. Whether the stock prices of AI concept stocks can continue to rise depends on whether the application of AI can bring productivity improvement to enterprises, solve user problems, and increase efficiency. Without these factors, speculation on concepts alone cannot support stock prices.
Wu Xinhong recently publicly stated that the combination of vertical large models, application scenarios, and business models is a major trend. He also mentioned that Meitu has accumulated deep computer vision technology and has built a comprehensive model algorithm architecture for the visual field. Meitu has rich application scenarios and practical experience in areas such as images, videos, design, and digital humans. Additionally, Meitu possesses a clear business model that enables rapid monetization of visual large models.
According to reports, Meitu has developed a visual model ecosystem that involves creators, developers, industry clients, and others. It can be said that Meitu not only has a considerable number of users on the consumer end (C-end), but also achieves monetization on the business end (B-end).
Regarding the commercial prospects of AIGC applications, Zhang Shule expressed that the current application of AIGC in the consumer market (C-end) is mainly experiential and educational. It is similar to a toy-like experience, and there is still a considerable distance to go before achieving widespread adoption among consumers. “Only when it becomes widely adopted in the business market (B-end), especially in the digital media field with streamlined production processes like multiple segmented production lines for games, and further simplified and integrated for consumer use (C-end), can it truly have commercial prospects.
Obviously, for Meitu, AIGC played an indispensable role in turning losses into profits. In its annual report, Meitu mentioned that under the driving force of AIGC technology, the monthly active users, payment penetration rate, and average revenue per user of its applications have all been greatly improved.
But it is still unknown whether Meitu AIGC can maintain its current growth status in the future. On the other hand, apart from Meitu, other internet giants and top players in AI are also collectively entering this track, and the competition that Meitu will face afterwards should not be underestimated. As for Meitu’s investment experience in the past, it has cast an uncertain veil over its profitability.
In fact, Meitu has long been labeled as ‘not focusing on its core business’ by the outside world. Meitu had been in a state of continuous losses before 2022. In order to fill the gap caused by these ongoing losses, Meitu had to explore alternative paths, and purchasing cryptocurrency became one of its self-rescue methods.
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On March 7, 2021, Meitu announced its voluntary purchase of cryptocurrency in a statement. The board believes that cryptocurrency has sufficient potential for appreciation and by allocating a portion of its cash reserves to cryptocurrency at this time, it can be used as a risk diversification measure in fund management. More importantly, the board believes that this demonstrates the group’s ambition and determination to embrace technological innovation, thus preparing itself for entry into the blockchain industry.
But in 2022, Bitcoin experienced a sharp decline. In that year, Meitu reported devaluation losses of approximately 86.6 million yuan and 198.2 million yuan respectively due to the purchase of Ether and Bitcoin. Despite suffering significant losses, Meitu did not give up its Bitcoin business. According to Meitu’s latest announcement, since purchasing cryptocurrencies in March and April 2021, the company has not made any further purchases or sales of cryptocurrencies based on its cryptocurrency investment plan.
Since the beginning of 2023, the Bitcoin market has experienced a turning point and has been on an upward trend. Recently, Meitu released a performance forecast, expecting to record a net profit attributable to owners of approximately 220 million to 265 million yuan in the first half of the year. In the same period last year, there was a loss of 266 million yuan, representing a year-on-year growth rate of 182.71% to 199.62%. According to non-international financial reporting standards, the adjusted net profit attributable to owners is expected to be between 140 million and 155 million yuan, compared with 36 million yuan in the same period last year, representing a year-on-year growth rate of 289% to 331%.
The main reason for Meitu’s expected turnaround from losses to profits is the market value of the purchased cryptocurrencies as of June 30, 2023, which exceeded the market price on December 31, 2022. Therefore, a reversal provision of approximately RMB 185 million was made for the impairment loss on purchased cryptocurrencies.
Regarding this, multiple industry insiders have expressed that purchasing cryptocurrency is a speculative behavior, with high returns and high risks coexisting. The profitability driven by the price correction of cryptocurrencies may not be sustainable for too long.
Faced with the future, Meitu urgently needs to find profit points from its main business.