Photo: IC
Zhihu Inc, operator of an online question-and-answer (Q&A) site that is the Chinese equivalent of Quora, completed its third round of institutional financing by raising $50 million from investors including Chinese Internet giant Tencent Holdings, industry portal leiphone.com reported on Wednesday, citing unidentified sources.
The report said that after the latest financing round, the company was valued at $300 million to $400 million. Experts said the deal, if the report is accurate, could be beneficial to both Zhihu and Tencent.
Tencent and Zhihu declined to comment on Wednesday.
Zhihu, which means "Do you know?" in Chinese, was founded in December 2010. The company was initially invested by a firm led by Lee Kai-fu, who once served as head of Google China and was the founder of Microsoft Research Asia.
In 2011, the company secured its first round of institutional investment from Shanghai-based Qiming Venture Partners.
Lu Wenliang, an analyst with Beijing-based CCID Consulting, said a tie-up with Tencent, if eventually announced, could benefit Zhihu the most.
" 'Moment', a text- and picture-sharing function embedded in Tencent's omnipresent WeChat instant messaging app and the Sogou search engine, will channel more web traffic to the Zhihu site and bolster its presence," Lu told the Global Times Wednesday.
In September 2013, NASDAQ-listed Sohu.com Inc joined forces with Tencent to boost the profile of its subsidiary Sogou search engine, particularly in the mobile Internet market. Tencent has invested $448 million in Sogou.
"Tencent desperately needs high-quality content and high-end users to fulfill and purify the virtual space on its sprawling social network, currently plagued to some extent by low-level content such as advertisements or non-intellectual content," Lu noted.
Li Donglou, an Internet industry observer, said Zhihu has similarities to both content reviewing site Douban and social networking site Sina Weibo. Douban groups people according to their interests.
Jing Yang, a 20-something white-collar worker in Beijing, said the Zhihu site combines entertainment features with practical usability to allow her learn something while reading for fun.
"In new media formats such as Zhihu, an individual actually finds himself or herself increasingly likely to find an expert to answer his or her questions. The answer that is on top of the list under the question is often the best answer, it comes in quite handy," Jing told the Global Times on Wednesday.
Jing has been using Zhihu for about a year, spending on average half an hour on the platform a day.
"There are quite a lot of guys who apparently have a higher education background or are from the professional ranks, such as physicians and IT engineers. And some of them have their identification verified," said Jing, who expressed satisfaction with the credibility of those who provided answers.
Initially, Zhihu's online registration process required an invitation, which slowed the growth of its membership. In March 2013, Zhihu opened its registration to all and the number of users began to increase rapidly to become one of the most famous Q&A sites in China.
Zhou Yuan, founder and CEO of Zhihu Inc, said in April during an interview with a tech blogger at Sohu Inc that the Zhihu community had 17 million registered accounts as of March this year. Zhou estimated the number would surge to 50 million by the end of this year.
"Compared to Quora, Zhihu is used by users of the Chinese language from all backgrounds. The rich expression of the Chinese language and wide user base made Zhihu a humorous and snappy popular science platform," Lu said. "And the platform's professional features underpinned its strong growth in China's Internet market, which is marred by junk information."
People have the desire to share what they know well and serve as somebody else's teacher, Lu added.
However, the site's profit potential has been questioned by industry insiders.
Li Donglou said Zhihu still lacks in a solid user base and experience in commercialization.
"Slow expansion is Zhihu's Achilles' heel. A 'veteran' company, given that it was set up as early as 2010, Zhihu's scale remains unimpressive compared with the skyrocketing growth of other Chinese Internet firms, in part due to its time-consuming cultivation of high-quality content," Li told the Global Times on Wednesday.
Its members are also restricted to a relatively small fraction of the public, Li said.
Tencent's investment may not be able to help Zhihu to establish a profitable business model as the latter continues to accumulate quality users and content in the near future, Lu said.
"But it is only a matter of time for market-savvy Tencent to tap the purses of high-end users grouped under the banner of Zhihu," noted Lu.