Strolling a tree-lined Shanghai street with friends, Hu Dongyuan pulls out her smartphone and does what millions of Chinese women do daily: Take a selfie, digitally “beautify” their faces and pop it on social media.
Such virtual makeovers, typically involving lightening skin, smoothing out complexions and rounding the eyes, have propelled Meitu Inc’s (美圖) selfie-editing app to the top ranks of China downloads.
With more than 450 million active users in China, Meitu is now also gaining traction abroad, using its more advanced features to challenge Facebook Inc’s Instagram and Snap Inc’s Snapchat, which depend largely on filters and stickers.
China has a world-leading 700 million mobile Internet users, vast numbers of whom use such apps to fuss over their digital appearance.
“It’s the same as with clothing and makeup. They are all ways for people to better present themselves,” said Hu, a travel agency employee, who likens Meitu to a cheap, nonpermanent form of cosmetic surgery. “Everyone uses it as a kind of personal advertisement.”
Meitu, which means “pretty picture,” launched a Hong Kong initial public offering (IPO) in December last year that valued it at US$4.6 billion at the time, despite consistently posting losses.
It was Hong Kong’s biggest tech IPO in nearly a decade.
Analysts have called Meitu a potential test case of the global potential of Chinese apps, particularly those aimed at women, a powerful consumer force.
“[Meitu] has really appealed to the beauty concept of China’s post-’95s,” Deloitte China Internet analyst William Chou (周?昌) said, referring to those born after 1995.
“Photo-sharing is a global phenomenon, but China has climbed to the top of the world in this,” he added.
The selfie editing craze highlights how Chinese lives are increasingly lived online, making a person’s virtual appearance as important as their real one, Xian Jiaotong University psychology professor Yu Feng (喻豐) said.
“Modern society has turned face-to-face communication into mostly Internet communication,” Yu said, adding that Chinese millennials are seizing the chance “to control themselves and their world.”
Meitu and domestic competitors, such as Camera 360 and Poco, shrewdly cater to Chinese beauty preferences for lighter skin and rounder eyes — key features allow easy modification of such attributes on screen.
Founded in Xiamen, Meitu initially provided photo editing software for PCs, introducing its first selfie app in 2013.
Meitu’s IPO prospectus said its apps process half of the pictures posted on Chinese social media and were used to alter about 6 billion photographs in October last year.
Its half-dozen applications, including one for altering video, have regularly been among the top photography app downloads in countries as diverse as China, Russia, Japan, India and Malaysia.
Chinese Internet giants such as Tencent Holdings Ltd (騰訊) and Alibaba Group Holding Ltd (阿里巴巴) have struggled to replicate their domestic dominance overseas.
However, Meitu said it had 430 million overseas users as of October, compared with about 500 million claimed by Instagram.
Yet, profits remain elusive. Meitu lost 2.2 billion yuan (US$320 million at the current exchange rate) in the first half of last year.
Meitu did not respond to requests for comment.
“Meitu’s big problem has always been that it came up with this killer app — and the usage is unbelievable. It’s crazy, but they never had a clear business model underneath it,” Peking University professor of investment Jeffrey Towson said.
Hungry for revenue, it launched its own smartphones designed for selfie-taking in 2013.
However, it sold just 646,446 units in the first 10 months of last year, a tiny amount in China’s massive market. Nevertheless, smartphone sales still make up more than 95 percent of Meitu’s revenue.
It has now promised to build an online “ecosystem” of apps and devices based on selfie-processing, which could include selling advertising space — as Instagram does — and launching a fashion-focused e-commerce platform.
“Our mission is to make the world more beautiful. Our wish is to build a beauty ecosystem,” the IPO prospectus said.
Its shares have risen 16 percent since they debuted, closing at HK$9.86 on Tuesday last week.
Chou said investors were ignoring Meitu’s current losses in the hopes it can pull off the planned business makeover.
“For tech companies, the future is more important than the past,” he said.
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