Zhihu Integrates AI Platform With DeepSeek, Posts First-Ever Profit

Core Insights - Zhihu Inc. has achieved its first-ever profit in the fourth quarter of 2024, marking a significant milestone after over a decade of operations [1][3][5] - The company is focusing on enhancing its knowledge-sharing platform through the integration of AI technology, specifically with its new Zhida.ai tool [2][9][12] Financial Performance - Zhihu reported a profit of 86.4 million yuan for the fourth quarter, reversing a net loss of 103.1 million yuan from the previous year, despite a 25% year-over-year revenue decline to 859.2 million yuan [3][4][7] - The gross margin improved by 3.8 percentage points to 62.9%, contributing to the profitability [3] - The annual loss for Zhihu was 169 million yuan, a significant improvement from the 840 million yuan loss the previous year [4] User Metrics - The monthly average users decreased by 18% year-on-year to 81.4 million from 99 million [4][8] - The number of AI-focused content creators grew by 50% year-over-year in the fourth quarter, with income-generating creators increasing by 22% [14] Business Strategy - Zhihu is prioritizing high-quality users over quantity, leading to a deliberate reduction in less profitable user segments [2][8] - The company has segmented its business into paid membership, core marketing services, and vocational training education services, with marketing services revenue declining by about one-third year-on-year [6][8] AI Integration - The introduction of Zhida.ai aims to enhance the quality of user-generated content by leveraging AI to provide expert-supplied answers [9][12] - The company believes that the integration of AI will improve content creation efficiency and attract advertisers seeking high-quality content [17] Market Position - Zhihu's stock price has seen a 13% increase following the announcement of Zhida.ai, although it remains significantly lower than its all-time highs since its IPO [15] - Analysts view Zhihu as undervalued compared to competitors, with a price-to-sales ratio of 0.79, but emphasize the need for consistent profitability to improve investor confidence [18]