Zheshang: Xiaohongshu welcomes a new round of international development starting point.

Zheshang released a research report stating that TikTok may be removed from the major mobile app stores in the United States on January 19, 2025. Even if it may be re-listed in the future, due to the uncertainty, American TikTok users are switching to other platforms, with China's Xiaohongshu receiving a large amount of traffic. On the evening of January 13, 2025, TikTok has surged to the top of the US iOS App Store's free list, which will play a crucial role in promoting Xiaohongshu's international development. At the current time, Xiaohongshu is in the early stages of expanding overseas, with the main beneficiaries being in advertising agencies and e-commerce operations. Zheshang's main points are as follows: Optimistic assumption: Xiaohongshu officially opens the door to internationalization. As a highly successful app in China, Xiaohongshu has shown impressive operational data in the past three years. According to QuestMobile data, Xiaohongshu's average MAU for the first ten months of the past three years has grown from 162 million to 214 million, an increase of 32.1%. Xiaohongshu has tried to expand overseas several times, with a presence in Asia, Europe, the United States, and Southeast Asia, but has not received good returns. Especially in the Japanese market, Xiaohongshu has failed four times in four attempts. Zheshang believes that a significant reason for these results is Xiaohongshu's community attribute. Xiaohongshu's success in China is largely due to its community attribute, with its "grass planting" feature and relatively quiet layout design helping to attract like-minded individuals. Xiaohongshu has cultivated its community atmosphere over many years in China, but it is difficult to replicate in international markets from scratch because such a community atmosphere takes a long time to build, and when businesses, KOLs, etc., find that the effect of investment is poor in the early stages of operating an app, they will immediately give up and turn to other platforms; users will make the same choice if they find that the quality and quantity of content are lower than expected. This wave of TikTok users switching to Xiaohongshu has brought in a large number of users in an instant, forming a certain international community framework, achieving the effect that Xiaohongshu has long wanted to create in overseas markets. It can be seen that there is already positive interaction in the posts of overseas users of Xiaohongshu, and on the TikTok platform, KOLs are still actively recommending the switch to Xiaohongshu, continuously redirecting traffic to the emerging international community. Under the optimistic assumption, Xiaohongshu's international development is expected to accelerate. Semi-pessimistic assumption, a wave of highly effective publicity. The occurrence of a semi-pessimistic situation may have the following possibilities: 1) TikTok may quickly resume operations in the United States due to strong support from Trump; 2) ByteDance's Xiaohongshu-like app Lemon 8 or other internet giants such as Meta, Google, etc., existing or newly launched apps could quickly fill the market gap. If the above situations occur, Xiaohongshu's current wave of new users may temporarily come to a halt. However, it is still believed that this will have a significant positive effect on Xiaohongshu's future development, especially in terms of international expansion. As mentioned earlier, Xiaohongshu's past promotional efficiency has been relatively low in overseas markets, but this wave of TikTok users switching en masse can be seen as an efficient global promotion. Even if the hype quickly fades, it still lays a good foundation for Xiaohongshu's future international development. Opportunities outweigh challenges Zheshang believes that the current timing is more of an opportunity than a challenge for Xiaohongshu. In addition to this wave of new users, there is a lack of corresponding competitors in the overall overseas internet market. Xiaohongshu's "grass-planting," community, search, news, and other functions are spread across different apps, with few directly comparable competitors. On the other hand, in terms of policy, Xiaohongshu is generally more friendly. Since China expanded its visa-free transit policy in November 2023, the number of tourists visiting China has greatly increased. According to the National Immigration Administration, in 2024 the number of visas issued to foreigners increased by 52.3% to 2.597 million, and the number of visa-free entries increased by 112.3% to 20.115 million. With the increase in the number of tourists visiting China, a group of overseas "big Vs" have actively promoted Chinese cuisine and scenery, receiving widespread praise from foreign netizens. On December 17, 2024, the National Immigration Administration announced that the stay time for foreign nationals in transit without a visa has been extended from the original 72 hours and 144 hours to 240 hours (10 days), and 21 more ports have been added for the entry and exit of transit visa-free personnel, further expanding the area of stay activities. Countries eligible for this policy include Russia, Brazil, the UK, the US, Canada, and 54 others. According to QuestMobile data, as of October 2024, Xiaohongshu's penetration rate in food is relatively high at 68.7%, and the penetration rate in tourism is growing rapidly at 9.4%, which aligns well with the information types that foreign visitors to China hope to obtain or share, in line with the intention of promoting exchanges. In summary, regardless of TikTok's ultimate fate in the United States, this wave of new users is a great opportunity for Xiaohongshu's international expansion. Whether there can be a greater breakthrough depends on the duration of TikTok's delisting, Xiaohongshu's internal strategies, and the direction of relevant policies. Key focus on targets 1) Advertising agencies: Leo Group Co., Ltd. (002131.SZ), Beijing Quanshi World Online Network Information (002995.SZ), Inly Media Co., Ltd (603598.SH), BlueFocus Intelligent Communications Group (300058.SZ), Inmyshow Digital Technology (600556.SH), FS Development Investment Holdings (300071.SZ), KAISA JiaYun Technology Inc. (300242.SZ), Huayang OURGAME (603825.SH), etc.; 2) E-commerce cooperation: Be...1) Internet giants: iJing Zhidemai Technology (300785.SZ), Hangzhou Onechance Tech Corp. (300792.SZ), Huayang OURGAME, etc.; 3) MCN institutions: Dian Guang Media, Shanghai Yaoji Technology (002605.SZ), Beijing Zhidemai Technology, Inmyshow Digital Technology, etc.; 4) Other cooperative institutions: Visual China Group (000681.SZ) (official photography partner), etc.Risk warning Decreasing user stickiness among new users, continued tightening of relevant policies, etc.