In the realm of technological advancements, artificial intelligence (AI) is increasingly becoming a dominant force, reshaping industries and driving significant changes in business models. Recent financial disclosures from various companies, particularly in the tech sector, tell a compelling story about the impact of AI on their performance. Notably, firms like Applovin and Palantir have reported impressive growth figures that surpassed market expectations, indicating a dramatic shift in how AI applications are perceived and utilized in the commercial landscape.The combination of improving financial performance and growing investor confidence points to a burgeoning recognition of AI's potential as a leading theme in technology investment. This has been reflected in soaring stock prices for several associated companies, both domestic and abroad. As we delve deeper into AI applications, it becomes evident that opportunities remain untapped across various sectors. Some companies have yet to be fully recognized for their innovation and potential in AI, suggesting a looming chance for value reassessment in the market.One such example is Zhihu, a platform known for its focus on Q&A content that is now expanding into AI-driven applications. This strategic pivot is demonstrating not just resilience but also a forward-thinking approach in harnessing AI's capabilities. The recent third-quarter financial results from Zhihu underscore this trajectory, revealing a remarkable reduction in losses alongside impressive growth in its AI search functionality.Zhihu's most recent earnings report indicates a revenue of 845 million yuan for Q3 2024, a staggering 96.8% reduction in net losses from the previous year, ultimately reporting a loss of just 9 million yuan—a record low since the company went public. Such a dramatic reduction in losses signifies that Zhihu is not only moving towards profitability but also enhancing its financial health significantly. The company achieved a gross margin of 63.9%, marking its best performance since its inception, showing that its operational efficiency is on the rise.In examining the various revenue streams, Zhihu's commitment to a multi-engine strategy has proven effective. The paid reading segment has made considerable contributions, generating 459 million yuan—over half of the total revenue for the first time, reaching 54%. Meanwhile, its marketing services and vocational education segments also reported revenue figures of 257 million yuan and 105 million yuan, respectively, indicating that self-operated vocational education is maintaining positive growth.Furthermore, Zhihu's AI search product, Zhihu Zhidao, is reporting significant growth, showcasing substantial increases both in visitor traffic and industry reputation. The company's ability to advance its AI search capabilities without substantially driving up costs highlights a strategic decision to focus on specific applications that align closely with user needs rather than investing heavily in developing large language models. This approach underlines the effectiveness of Zhihu's business model and validates the company’s strategy for sustainable growth in the AI landscape.Taking a broader perspective, it is clear that Zhihu's strategic direction is not only timely but also intensely forward-looking. The competition in the AI domain has transitioned from merely developing large models to applying these models effectively. As the AI market matures, the true value lies not in the models themselves but in the applications derived from them. This competition has revealed that companies succeeding with AI applications are the ones that can genuinely resonate with user demands, highlighting that those firms which focus on practical applications will likely outperform their competitors in this landscape.Zhihu has strategically rooted itself in specific applications, ensuring that its growth trajectory aligns with real user needs. The proactive initiatives taken by the company are indicative of a well-thought-out plan. For instance, Zhihu’s founder, CEO Zhou Yuan, had emphasized the importance of application-driven improvements. One year ago, he stated the intent to leverage large model technology across various scenarios, such as discussions and educational applications. This vision has started to materialize with the rollout of features like "Discover AI Search" and "Zhihu Zhidao," representing a formal move towards new AI search functionalities.Moreover, "Zhihu Zhidao" is not merely a product; it symbolizes the culmination of Zhihu's long-term investments in content and its technological foresight in AI. The product's rapid market penetration suggests that Zhihu is reaping the benefits of its strategic efforts in AI development. As of late October, "Zhihu Zhidao" debuted a new functionality known as "Professional Search," which integrates professional content sources and signifies an expansion into more specialized and practical search capabilities. This move is poised to optimize Zhihu's community ecosystem, creating stronger connections between content creators and users, further driving engagement on the platform.Examining Zhihu from an industry standpoint, its inherent advantages in AI applications become even clearer. As competition in AI applications intensifies, the focus is shifting towards deeper, more sophisticated user needs. The current race among companies to build extensive models has released an unprecedented contest known colloquially as the "battle of the hundred models." However, there are limits to how this approach aligns with market needs, particularly regarding sustainability. Businesses are beginning to ponder whether sheer computational power is the answer, or if they should prioritize creating user-centric applications.Understanding the actual needs of users—such as the capability of an AI application to resolve real-world problems—emerges as a central concern. The functionality of AI models is becoming less relevant than the practical applications that stem from them. For example, Perplexity, a popular question-answering AI engine, operates using third-party models. Its success showcases that advanced models are not the only paths to delivering effective and precise solutions. In this era where the value of AI equations is on a steep curve towards displacing massive infrastructural investments, Zhihu's approach to creating meaningful connections within its community empowers the company with the necessary agility to adapt and prosper.Accordingly, Zhihu's AI search functionality has seamlessly transitioned from fulfilling general search demands to addressing more specialized, professional inquiries. This shift signifies a robust opportunity for Zhihu to establish itself as a pioneer in providing integrated solutions for AI search and access to academic resources, thus setting a new standard in the industry.As such, the ability of Zhihu's AI application to maintain a strong commercial model is evident. Starting from its Q&A roots, the community's engagement naturally enhances the interaction with AI, forming a vibrant ecosystem where user demand meets content supply. This synergy not only ensures continued user engagement but also amplifies the efficacy of the AI search function, creating a virtuous cycle that aids growth.What sets Zhihu apart is a differentiation that other competitive products fail to capture. By leveraging real Q&A data from its user base, the platform provides not just reliable information but also fosters deeper interactions between users, content creators, and AI technologies. This differentiation culminates in a more immersive user experience rather than just a straightforward answer-engine model.Furthermore, as AI search continues to evolve, the commercial model embedded within Zhihu is poised to reveal its full potential. AI search represents a vital gateway into the broader internet ecosystem, promising expansive commercial opportunities as it becomes ingrained in users’ digital experiences.As the AI landscape continues to progress, the natural benefits of Zhihu's business model are likely to come into sharper focus. With the ongoing push in AI search initiatives and the foundational advantages provided by the platform's design, there lies an exciting prospect for Zhihu to reshape its identity and value proposition within the tech ecosystem.In conclusion, the threads interwoven through Zhihu's recent developments point toward a significant reevaluation of its value in the market. As profitability improves, business models shift, and new initiatives take hold, Zhihu is undergoing a remarkable transformation that demands fresh perspective from investors and market participants. What we’re witnessing is the gradual emergence of a Zhihu that is animated by unparalleled imagination and potential in the community-driven content landscape.
