RedNote TikTok influx is more curse than blessing

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.

By Hudson Lockett

HONG KONG, Jan 20 (Reuters Breakingviews) - Gaining almost 3 million foreign users in one day sounds like a dream come true for a social media platform nearing saturation in its home market. But for RedNote, the Instagram-like upmarket Chinese app, the recent influx of refugees fleeing what appeared to be a permanent U.S. ban for video platform TikTok could be more trouble than it’s worth.

There are some upsides for the app known in Chinese as Xiaohongshu, or “little red book”, founded in 2013 by Charlwin Mao. In contrast with the little red book of Chairman Mao (no relation), RedNote’s embrace of conspicuous cosmopolitan consumption has made it a must-have for mainland users travelling abroad. And unlike TikTok, RedNote is not split into domestic and international versions, facilitating a burst of cross-border comedy as new American users interact with their Chinese peers.

This has all added to buzz around the Alibaba- 9988.HK and Tencent-backed 0700.HK company, which in 2023 turned its first profit of $500 million. It was on track to double that last year, per Bloomberg, which also reported last week that certain backers were in talks to sell some of their holdings at an implied valuation of at least $20 billion. That would mark a return to what RedNote was worth in 2021, just before a crackdown on foreign listings by Chinese technology startups dashed hopes of an imminent initial public offering in New York. A long-anticipated Hong Kong IPO still requires approval from the Cyberspace Administration of China, thanks to the troves of data RedNote keeps on its more than 310 million users.

The American influx, though, has prompted the CAC to order the company to improve English language moderation and block Chinese users from seeing posts by those in the U.S., The Information reported on Thursday.

That will diminish the draw of RedNote for Americans who joined the platform partly as a middle-finger to President Joe Biden's administration over its TikTok ban. And with President-elect Donald Trump vowing to rescind that decision, there is little motivation for more of TikTok’s 170 million U.S. users to jump ship.

So it means RedNote will be burdened with higher costs and more regulatory scrutiny from Beijing in exchange for a fractional gain in foreign users that's unlikely to do much to boost advertising revenue. The road to public listing has become that much more complicated.

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CONTEXT NEWS

Nearly 3 million new users joined China-based social media platform RedNote, known domestically as Xiaohongshu, in just one day, Reuters reported on Jan. 17, citing analytics firm Similarweb. A further 700,000 had signed up earlier in the month, Reuters reported a day earlier. The influx was triggered by a U.S. ban slated for Jan. 19 on TikTok, the Chinese-owned video platform used by 170 million Americans. However, Tiktok began restoring service after President-elect Donald Trump announced he would revive U.S. access to the app.

Some of Xiaohongshu’s top backers are in talks to sell shares at an implied valuation of at least $20 billion, Bloomberg reported on Jan. 16, potentially marking a rebound from lower valuations caused by Beijing’s tech crackdown in 2021. On the same day, The Information reported regulators had instructed the company to segregate Chinese and American users and improve censorship of English-language content.

Graphic: Support for a TikTok ban is slipping https://reut.rs/3PGn0Du

(Editing by Antony Currie and Ujjaini Dutta)

((For previous columns by the author, Reuters customers can click on LOCKETT/
hudson.lockett@thomsonreuters.com))