Chinese selfie apps giant Meitu sees profits triple in 2023 on back of new generative AI-powered tools

Chinese selfie apps giant Meitu said new image-and-video-editing tools powered by artificial intelligence (AI) helped the company triple its profits last year, in stark contrast to how many other firms struggle to monetise the technology through their own generative AI initiatives.

Citing its preliminary assessment of unaudited accounts, Hong Kong-listed Meitu estimated net profit last year to be between 330 million yuan and 370 million yuan (US$46.36 million and US$51.98 million), up more than 200 per cent from 2022's net profit of 111 million yuan, according to the company's statement last week.

The surge in profits was attributed to its generative AI-based image and productivity tools that include Action, which enables users to produce narrated videos, and X-Design, a platform that allows users to create graphics design for posters of products and services.

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Both of those tools "exceeded expectations" in terms of user growth and subscription conversion, according to Meitu.

Generative AI refers to algorithms, such as those in ChatGPT and similar services, that can be used to create new content, including audio, code, images, text, simulations and videos.

Meitu's success in monetising its generative AI tools comes as major tech companies in the United States, China and elsewhere are struggling to turn a profit from their own initiatives, while continuing to make huge capital outlays in this market segment.

Microsoft, Alphabet's Google and Advanced Micro Devices, three US Big Tech firms striving to incorporate AI into their products, saw their shares slip in late trading on Tuesday, as investors sought more clarity and tangible results from these companies' AI efforts.

Companies continue to face challenges in generating income from their AI initiatives, according to Kenneth Fong, head of China internet research at Swiss investment bank UBS, in a briefing in Hong Kong on Tuesday. He said it was "not easy" to get Chinese consumers to pay for software and to convince enterprises to adopt these solutions when they are looking to cut costs in a bad economy.

Meitu also said it has made significant headway on its global expansion last year, as its products are now available in 195 countries and regions, according to the company's statement. The firm also indicated that it recorded "rapid growth" of subscribers outside mainland China last year.

Founded in 2008 in Xiamen, a city in southeastern Fujian province, Meitu announced a major push into generative AI last June when it launched a range of new AI tools for images and videos, as well as the latest iteration of MiracleVision - its self-developed AI large vision model.

That followed internal efforts that included introducing AI tools into employee workflows and training programmes for workers to better understand the technology, according to Meitu founder and chief executive Wu Xinhong, who was cited in a report by technology media outlet 36Kr in June.

Meitu's generative AI push appears to have boosted investor confidence in the company when its shares jumped more than 7 per cent last week after its 2023 profit estimates were announced. On Wednesday, Meitu's shares closed down 3.73 per cent to HK$2.32.

Meitu went public in Hong Kong in 2016 after the worldwide success of its app, which enabled people to touch up their selfies by removing blemishes, enlarging their eyes or making their faces and bodies look slim.

Still, the app maker's share price went through a slump when several earlier bets did not pay off. The company tried to compete in the smartphone market, pivoted to social media and then made large investments into cryptocurrencies.

In July 2022, Meitu warned investors that its losses could widen by as much as 154 per cent after cryptocurrency prices plunged owing to a series of exchange meltdowns.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.

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