Keep Reports Net Loss of 295 Million Yuan in First Annual Report AfterListing, Emphasizes Medal Business and Return to Tool Attribute
Beijing, March28, 2024 – Keep, the popular Chinese fitness app, reported a net loss of 295 million yuan (approximately$42.5 million) for the full year ended December 31, 2023, its first annual report since going public. Whilethe loss narrowed by 55.7% year-on-year, the company’s revenue also declined by 3.3% to 2.14 billion yuan.
The decline in revenue was attributed to adecrease in demand for Keep’s own-brand sports products. The company’s adjusted net loss rate also narrowed to 13.8% from 30.2% in 2022, primarily due to costcontrol measures implemented last year. Keep’s sales and marketing expenses decreased by 12% to 650 million yuan, while research and development expenses fell by 16.2% to 450 million yuan.
Shifting Revenue Structure and Emphasis on Medal Business
The mostsignificant change in Keep’s revenue structure was the decline in the proportion of revenue generated from its own-brand sports products. In 2020, 2021, and 2022, the sales of these products accounted for 57.5%, 53.9%,and 51.4% of total revenue, respectively. However, in 2023, this proportion dropped to 44.2%, falling behind online membership and paid content, which now account for 46.6% of revenue.
The revenue from own-brand sports products declinedby 16.8% year-on-year to 946 million yuan. Keep attributed this decline to its cost-cutting strategy, which included reducing costs related to product development, deployment, and marketing.
Meanwhile, revenue from online membership and paid content increased by 11.4%to 996 million yuan. Advertising and other revenue also saw a 9% increase, reaching 196 million yuan, accounting for 9.18% of total revenue.
Medal Business Takes Center Stage
Despite exploring various business models, including smart hardware, sports consumer goods, andoffline fitness spaces, Keep has yet to find a stable and profitable model. Recent reports suggest that Keepland, the company’s offline fitness space, has been scaling back its operations, with layoffs in the operations department and the cancellation of expansion plans in Guangzhou.
The company’s medal business, which has beencriticized for its focus on consumer psychology rather than promoting genuine exercise, has emerged as a potential revenue driver. The average revenue per paying user for virtual sports events, which includes medal rewards, grew by over 30% year-on-year.
Keep, which previously avoided discussing the medal business, is now openlyemphasizing its potential. Keep co-founder Peng Wei stated that the company will focus on upgrading the medal system this year. The competition + medal + famous IP collaboration model has made Keep’s medals a popular form of social currency among young people.
Declining Monthly Active Users and App’s Return toTool Attribute
Keep, a nine-year-old app, is facing growing pressure from investors to become profitable. As of March 28, Keep’s stock price closed at HK$4.06, representing a decline of over 80% since its listing eight months ago. The company’s market capitalization currently stands at approximately HK$2.13 billion, a significant drop from its peak of HK$22.3 billion.
User retention and growth remain a concern. Keep’s average monthly active users (MAU) fell by 18% year-on-year to 29.76 million, while average monthly paying members decreased by 12% to 3.19 million. The company attributed the decline to the high base effect of MAU and paying members in 2022, which was driven by restrictions on outdoor activities during the pandemic. The increase in offlineleisure and tourism activities after the pandemic in early 2023 also contributed to the decline.
Keep has also taken steps to control costs, reducing marketing spending and user acquisition expenses. This resulted in a 9.5% decrease in online membership and paid content costs to 370 million yuan. Salesand marketing expenses also fell by 12% to 650 million yuan.
However, Keep’s average monthly revenue per MAU increased by 17.6% year-on-year in 2023, driven by the growth of the virtual sports events business.
Focuson Core Functionality and AI Integration
Keep’s app has been criticized for its bloated features, excessive advertising, and the monetization of previously free content, leading to user churn. In response, Keep has launched a new version of its app, Keep 8.0, which emphasizes its core functionality as a fitnesstool. The Energy Ring, a feature that tracks user progress and encourages participation in various sports, is now prominently displayed in the app’s navigation bar.
Keep’s CEO, Wang Ning, also mentioned the potential for integrating AI into the company’s operations. He stated that Keep will actively develop and applycutting-edge technologies and intelligent features, exploring AI applications in overseas markets to drive innovation and discover new business opportunities.
While Keep’s efforts to streamline its app and explore AI integration are positive steps, the company faces a challenging path to profitability. The fitness app market is highly competitive, with numerous free alternatives available onplatforms like TikTok, Bilibili, and Xiaohongshu. Keep’s ability to attract and retain users while navigating the evolving landscape of the fitness industry will be crucial for its future success.
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