Group 1: Financial Performance - The company achieved a revenue of 717 million in Q2, with an adjusted net profit of 91.3 million, and a GAAP net profit of 72.48 million, maintaining a gross margin of 62.5% [1][2] - It has been profitable for three consecutive quarters, indicating an improvement in operational quality with reduced R&D, marketing, and management expenses [2] - The cash flow position is strong, with 4.8 billion in cash on hand and a share buyback of 31.1 million shares, reflecting management's confidence in future prospects [3] Group 2: User Engagement and Revenue Structure - The primary revenue source remains paid reading, contributing over 400 million, while advertising and vocational education account for 220 million and 60 million, respectively [2] - Although the number of subscription members decreased to 13.2 million from 14.2 million, the average daily active user engagement increased to 38 minutes, a 17.6% year-on-year rise [4][5] - The ARPU for paid members is increasing, indicating that while the user base may be shrinking, the remaining users are contributing more value [5] Group 3: AI Integration and Future Prospects - The monthly active users for the "Zhihu Direct Answer" feature have surpassed 10 million, marking a significant step towards instant Q&A capabilities [9] - AI-related content production has increased by 46% year-on-year, showing a deepening integration of AI within the community ecosystem [10] - The company is positioned as a leading platform for AI discussions in China, with a large network of expert contributors, which could lead to differentiated revenue opportunities [13] Group 4: Competitive Landscape and Strategic Choices - Compared to Quora, which has focused on an AI platform, Zhihu is enhancing its existing community by integrating AI to improve its Q&A system [15][17] - The company faces a choice between maintaining a profitable niche community or evolving into a knowledge hub for the AI era, similar to Reddit's approach of content monetization through data licensing [19][20] - The future direction remains uncertain, but the company has the financial stability and time to explore various strategic options [21]

Core Viewpoint - Zhihu is transitioning from a high-quality knowledge-sharing platform to a more commercialized model, focusing on profitability while facing challenges in user engagement and content quality [2][9][14]. User Engagement - Zhihu's average monthly active users (MAU) peaked at 101.2 million in Q3 2021 but has since declined to 81.1 million in Q3 2024, indicating a significant drop in user engagement [5][4]. - The decline in MAU is attributed to a combination of optimizing advertising spend and enhancing user experience, leading to a reduction in low-engagement users while increasing high-engagement users [5][4]. Business Diversification - Since 2016, Zhihu has explored various revenue streams, including advertising, paid memberships, and knowledge services, with non-advertising revenue accounting for 61% of total revenue in 2021 [9][10]. - Paid membership revenue became the primary income source in Q2 2022, reaching 271 million yuan, a 75.1% year-on-year increase [10]. - Zhihu's foray into vocational education has shown significant growth, with revenue from this segment increasing by 457.14% year-on-year in Q3 2022 [10]. Short Video and E-commerce Ventures - Zhihu has attempted to enter the short video and e-commerce markets but has faced challenges in establishing a strong presence in these areas [11]. - Despite various attempts at diversification, paid memberships remain the most significant revenue source, contributing 57.27% of total revenue in Q1 2025 [11]. Short Drama Market Potential - The short drama market in China reached 50.5 billion yuan in 2024, surpassing the film box office for the first time, presenting a new opportunity for Zhihu's "Salted Story" initiative [14][15]. - Zhihu's "Salted Story" has produced over 100 quality IPs for the short drama industry, with successful adaptations like "The Pen" setting records on platforms like Tencent Video [3][15]. Challenges and Future Outlook - Analysts express skepticism about Zhihu's ability to capitalize on the short drama market, suggesting that platforms like Douyin and Kuaishou may dominate due to their advanced recommendation algorithms [16]. - The company is encouraged to focus on knowledge monetization and original content creation as a sustainable path forward, despite the challenges faced in the current market landscape [17].

Core Viewpoint - The article discusses how AI-generated content is flooding the internet, making information less scarce, while professional and original content becomes increasingly valuable. It highlights the recent financial performance of Zhihu as a case study of how a content platform can thrive amidst the AI wave [1]. Financial Performance - Zhihu achieved a total revenue of 3.6 billion yuan for the year 2024, with Q4 revenue reaching 860 million yuan. The adjusted net profit for Q4 was 97.1 million yuan, and the adjusted operating profit was 23.1 million yuan, marking the first quarter of comprehensive profitability since its IPO [3]. - The paid membership business contributed 1.76 billion yuan in revenue, accounting for nearly half of the total revenue. The average monthly subscription members grew from 14.5 million in 2023 to 15 million in 2024, indicating strong demand for professional content [3]. - By the end of Q4, Zhihu had a cumulative content creation volume of 870 million, a year-on-year increase of 12.9%, with over 77 million creators driving professional discussions [3]. Professional Content and AI Integration - The article emphasizes that as AI-generated content becomes more prevalent, original and professional content will become scarcer. Platforms like Coursera and Substack, which focus on high-quality professional content and subscription models, are gaining traction [4]. - Zhihu's CEO stated that AI amplifies the value of professional content rather than replacing it, indicating a strategic direction that combines expert networks with technology [5]. - The integration of AI into Zhihu's platform, particularly through the "Zhihu Direct Answer" feature, aims to enhance the quality and efficiency of content generation, addressing the common issue of AI hallucinations [9][13]. AI Model Development - Zhihu has developed its own AI model, "Zhihai Map AI," and has made significant advancements in AI capabilities, including the integration of the DeepSeek-R1 model, which enhances reasoning and output quality [7][13]. - The article notes that the hallucination rate of mainstream AI models ranges from 10% to 35%, with Zhihu's approach leveraging its community-driven content to mitigate this issue [10][11]. Community and Commercialization - The user engagement on Zhihu has significantly increased, with monthly active users of the "Zhihu Direct Answer" feature rising from one million to ten million, indicating a tenfold growth [14]. - Zhihu's cash reserves amounted to approximately 4.9 billion yuan, providing a financial cushion for further AI commercialization efforts [15]. Trust Mechanism and Value Redistribution - The introduction of the "source answerer" feature allows creators to have digital sovereignty over their content, potentially leading to a new revenue-sharing model based on content contributions [20]. - The article suggests that as AI-generated content proliferates, there will be a growing demand for verified and authentic content, positioning platforms like Zhihu to redefine trust mechanisms in knowledge production [17][18]. Conclusion - Zhihu's recent financial success and strategic integration of AI highlight the enduring value of professional content in the AI era. The company is poised for growth as it navigates the challenges and opportunities presented by AI technology [21].