Core Viewpoint - Soul, the anonymous virtual social platform founded by Zhang Lu in 2016, has submitted its prospectus for an IPO in Hong Kong after previous attempts in the U.S. and Hong Kong failed. The company claims to have turned a profit in 2023 after incurring approximately 1.5 billion yuan in adjusted net losses from 2020 to 2022, with a projected maximum adjusted net profit of 360 million yuan in 2025 [1][2][12]. Group 1: Financial Performance - Soul's revenue projections for 2022 to 2025 are 1.67 billion, 1.85 billion, 2.21 billion, and 1.68 billion yuan, with over 90% of revenue coming from "emotional value services" and only 10% from advertising [8]. - Despite a high gross margin of 81.5% for "emotional value services," Soul's net profit margin has been declining due to high sales and marketing expenses, which accounted for 40% to 50% of total revenue from 2022 to 2025 [9][11]. - The company has accumulated significant financial liabilities, with redeemable shares and obligations reaching 11 billion, 11.66 billion, 12.27 billion, and 12.4 billion yuan from 2022 to 2025, impacting net profit due to high financial costs [14]. Group 2: User Engagement and Challenges - Soul's monthly active users peaked in 2022, with a projected decline to 28 million by August 2025, down from 29.4 million in 2022 and 31.6 million in 2021 [10][9]. - The average revenue per paying user increased from 75.3 yuan in 2022 to 104.4 yuan by August 2025, but user complaints regarding automatic renewals and refund difficulties have surged, with over 5,600 complaints reported [15][16]. - The platform has faced scrutiny for its governance, with issues related to scams and inappropriate content leading to regulatory challenges, including a previous suspension in 2019 due to violations [21][22].

Core Insights - Momo's subsidiary, Tantan, has been sold for $760 million, while Soul and Miliang Technology are preparing for IPOs in Hong Kong, marking a significant shift in the Chinese social networking landscape over the past decade [1] Group 1: Company Performance - Soul's monthly active users reached 26.2 million by the end of 2024, which is more than three times that of Miliang Technology [3][29] - Despite having a larger user base, Soul's revenue for 2024 is projected at 2.211 billion yuan, nearly on par with Miliang Technology's 2.373 billion yuan [5][4] - Soul's gross margin for 2024 is expected to be 83.7%, significantly higher than Miliang Technology's by over 38 percentage points [27] Group 2: Business Model and Revenue Generation - Soul's primary revenue source comes from user purchases of virtual items and subscription fees, referred to as "emotional value service fees" [12][13] - Revenue from C-end user recharges (emotional value business) for 2022 to 2024 is reported as 1.519 billion yuan, 1.667 billion yuan, and 1.969 billion yuan, respectively, accounting for 80-90% of total revenue [15] - The paid user ratio for Soul is only 6.3% in 2024, which is lower than Miliang Technology's by over 5 percentage points [30] Group 3: Strategic Shifts and Market Positioning - Soul has shifted its branding from a "social metaverse" to an "AI + immersive social platform," reflecting a broader trend in the market [8][12] - The company plans to utilize the funds raised from the IPO to enhance its AI, GPU, and data analysis capabilities [22] - Soul's approach to user matching combines interest-based algorithms with geographical factors, aiming to create a more private and engaging user experience [27][21] Group 4: Challenges and Financial Health - Despite a strong user base, Soul reported a net loss of 149 million yuan in 2024, primarily due to financial liabilities from redeemable shares issued as part of a listing agreement [28] - The company's sales and marketing expenses for 2024 are projected at 889 million yuan, accounting for 40.2% of its revenue, which is a reduction of over 10% compared to 2022 [32] - Soul's ongoing challenge is to improve monetization efficiency while maintaining its core positioning in the market [33]