When Chinese internet companies seek initial public offers, they usually look to the United States, where the rules on profitability are less stringent. SMZDM, an online shopping guide that few people from China have listened to, has entered a small phase of internet start-ups that are trading on public markets in mainland China.
As a result of SMZDM, short for Shen Me Zhi De Mai or “what is worth buying” in Chinese, almost 44% rose to its shares on its first trading day in Shenzhen. After her IPO is priced at 28.42 yuan ($ 4.13) and the opening day at 34.1 yuan, SMZDM closed at 40.92 yuan. This adds value to the company at around 2.18 billion yuan ($ 320 million).
The company is collecting 330 million yuan from the public offering and it intends to spend the money on upgrading its large data capacity so that it can deliver more personalized content and services to users.
Before applying for A-share listing on the main aims of China, firms usually need businesses through three-year profitability, although the country has made progress in making high-tech loss businesses. SMZDM clocked (in Chinese) net income of 19.35 million yuan ($ 2.81 million), 35.16 million yuan and 86.24 million yuan in 2015, 2016 and 2017, respectively. Its income focused from 97.29 million in 2015 to 367 million yuan in 2017.
Since its foundation nine years ago, SMZDM has only built from one institutional investor, China Growth Capital. Why are shares sold to the public when the company is already earning good money?
“To start a web-start to attract talent, it needs to have a transparent corporate structure and employee ownership plan,” said Wu Haiyan, management partner at China Growth Capital, with TechCrunch in an interview. “Obviously, getting public is another way of raising capital.”
SMZDM started as blog founder Sui Guodong, where he reviewed a range of gadgets as a hobby. Over time, the WordPress site became a public platform where people share instructions on buying products of all kinds – from children's milk formula to Nikon's latest lens – and where to get the best market. When a transaction occurs on its partner markets, SMZDM gets commission.
The model means that shopping directions such as SMZDM are heavily dependent on shopping portals to be successful and are susceptible to the changes by e-commerce beekeepers. In fact, more than 85% of SMZDM's commission and marketing revenue came in 2018 from Alibaba, JD.com, Amazon and its other clients.
For now, at least, Alibaba and such seem to show a lot of interest in third party product review sites. As Wu said, “the core of the e-commerce portals is driving sales instead of building communities to give and receive impartial feedback,” is the value of SMZDM value. The main performance index of an online community, she said, is the user's level of interaction and the amount of content generated.
That's why Alibaba and Tencent – supported by JD.com e-commerce companies, Pinduoduo and Mogu – spent money at Xiaohongshu (“The Little Red Book” in Chinese), a market platform, some of the social media for lifestyle trends. to learn.
While shoppers on Xiaohongshu are mostly women, as are the majority of Chinese e-commerce services, more than half of SMZDM users are men, mainly due to the abundant content. hardware and household appliances.
The library argues that its products reviews, Wu, what SMZDM sets out from its competitors.
“It takes any time to build a community, and one capital cannot help it grow,” said the investor. “People stay on high quality content and interact with like-minded users. When a community begins its own truth, people will come around. ”