So-Young's Content Ecosystem Drives Strong Growth, Q4 2019 MAU Surges Over 120%

On March 23, 2020 (Beijing Time), So-Young Inc. (NASDAQ: SY) released its financial results for the fourth quarter and full year of 2019.

The report shows that as of December 31, 2019, the company’s total revenue in the fourth quarter was RMB 358.2 million, a year-on-year increase of 95.7%; net profit was RMB 69.9 million, a year-on-year increase of 71.4%; and non-GAAP net profit was RMB 86.4 million, a year-on-year increase of 86.5%. Following SoYoung’s total revenue in the third quarter of this year exceeding the high end of the company’s guidance, its total revenue for this quarter once again surpassed the high end of the company’s expectations.

SoYoung is currently the medical aesthetics platform with the largest user base and the highest number of registered institutions and physicians in China. Amidst the explosive growth of China’s medical aesthetics industry, SoYoung has also experienced robust business expansion. The fourth-quarter report shows that the average monthly active users (MAU) of the SoYoung app reached 3.67 million, a year-on-year increase of 120.1%, marking over 120% MAU growth for two consecutive quarters. The total gross merchandise value (GMV) of facilitated medical aesthetics service transactions amounted to RMB 1.0775 billion, up 66.6% year on year. For the full year, the cumulative GMV of facilitated medical aesthetics service transactions reached RMB 3.6406 billion, representing a year-on-year increase of 72.6%.

2019 was a landmark year for China’s medical aesthetics market, marking its breakthrough into the mainstream. On one hand, So-Young made its debut on international capital markets as a vertical medical aesthetics platform, becoming the world’s first publicly traded internet-based medical aesthetics company. On the other hand, industry giants such as Dianping, AliHealth, JD.com, and Xiaohongshu aggressively entered the medical aesthetics sector. Meanwhile, regulatory authorities increasingly prioritized standardization within the market, with national and local governments in China intensively issuing a series of policies in 2019 aimed at rectifying and regulating the medical aesthetics industry.

As the spotlight shone on the medical aesthetics market from multiple angles and the “leading players” took center stage, So-Young leveraged its 2019 financial performance to demonstrate to users, media, investors, and partners its competitive advantages and commercial value as a professional platform in high-stakes decision-making domains.

Mr. Jin Xing, Chairman and Chief Executive Officer of So-Young International Inc., stated, “Our performance in this quarter and for fiscal year 2019 demonstrates the company’s remarkable achievements in strengthening platform innovation, adaptability, and execution amid a volatile environment. We implemented several strategic adjustments aimed at further expanding our vibrant and growing community of medical aesthetics users and professionals. These initiatives drove a 95.7% year-over-year increase in revenue, surpassing the upper end of our guidance. Building on this momentum, we are committed to achieving our 2020 objective of creating a more diverse and engaging high-quality content community. This will enhance user stickiness and enable users to seamlessly and efficiently access information and services throughout their decision-making journey.”

Mr. Yu Min, Chief Financial Officer of So-Young International Inc., added, “This quarter, we made strategic resource allocations to optimize the overall user experience and enhance operational efficiency and profitability, which drove a 71.4% year-over-year increase in the Company’s net profit. We will continue to strategically implement the commercialization of our platform services, leveraging the synergies we have built within our user community to boost long-term profitability. We are creating more diverse, engaging, and high-quality content. Despite the challenging macroeconomic environment, our business fundamentals and long-term growth momentum remain robust.”

SoYoung’s content ecosystem is primarily structured into three layers: a new media matrix, utility-based products, and community interaction with content accumulation.

In May 2014, SoYoung published its first article on its WeChat official account. By February 2020, SoYoung had established a new media matrix comprising an MCN network of seven WeChat official accounts, 16 Weibo accounts, and 15 video columns. Its content covered areas such as medical aesthetics, skincare, fitness, cosmetics, and aesthetics, achieving over 1 billion monthly views across all platforms, representing a year-on-year growth of more than 200%.

Users can access SoYoung’s mini-programs, such as the SoYoung Magic Mirror, through SoYoung New Media. Developed by SoYoung’s Face AI Lab and fully launched in May 2018, the SoYoung Magic Mirror is the first true effect-simulation assistance system in the medical aesthetics industry. By opening the SoYoung Magic Mirror within the SoYoung app or on designated devices and scanning their face, users can obtain facial analysis results and view simulated outcomes for a wide range of aesthetic procedures. This technology leverages the vast repository of facial images and cosmetic procedure data accumulated on the SoYoung platform, employing deep learning and image processing techniques to generate simulations.

Magic Mirror is just one product within SoYoung’s suite of mini-apps. Currently, more than 10 such tools have been deployed, including skin analysis, an aesthetic medicine encyclopedia, video consultations, drug authenticity verification, and post-procedure community forums, covering key content and information needs across the pre-operative, intra-operative, and post-operative stages.

By leveraging mini-programs, So-Young has not only enriched the overall user experience but also established a channel between its new media matrix and the So-Young platform community. This approach enables the cost-effective capture of highly relevant information from a large pool of potential users, thereby facilitating the accumulation of precise, high-quality users within the community. In 2019, So-Young’s mini-programs were used more than 100 million times in total.

China’s medical aesthetics market is a classic “lemon market,” characterized by information asymmetry between buyers and sellers, where sellers possess significantly more information than buyers, making trust a formidable barrier. SoYoung has addressed this challenge by establishing a robust institutional framework and cultivating a community ecosystem over many years, enabling potential users to access more precise and reliable content upon entering the community, thereby bridging this trust gap.

Currently, the content on the SoYoung community primarily consists of Beauty Diaries, Q&A sessions, topics, and live streams. This content is created and edited by users, influencers, physicians, and other professionals. Taking Beauty Diaries as an example, this feature was launched in May 2014. It allows consumers to document their pre- and post-operative conditions through text and images, thereby alleviating anxiety during the recovery period while also evaluating the outcomes and service capabilities of specific procedures, institutions, and physicians. As such, it serves as a critical reference for potential consumers in their decision-making process. To date, there are 3.5 million approved and publicly visible Beauty Diaries on the SoYoung platform.

The three layers—new media matrix, utility products, and community interaction with content accumulation—form a content ecosystem that covers the entire user consumption journey, assisting users in making decisions.

Each year, So-Young iterates and upgrades its community platform. In 2019, the adjustments made to the So-Young community were regarded by the company as strategic. This was because the company’s management team unanimously believed that carefully nurturing the community ecosystem is indispensable for expanding business scale over the long term and further enhancing competitive advantages. The specific directions of the adjustments were as follows:

First, strengthen doctor engagement by introducing 1-on-1 video consultations and Q&A features, as well as optimizing short-video functionalities.

Taking the 1-on-1 video consultation feature as an example, physicians can view patients’ consultation requests anytime and anywhere via the mobile backend. Its key advantage lies in enabling a “face-to-face” communication between the physician and the patient within minutes, allowing for rapid identification of the patient’s needs and the provision of targeted recommendations.

The outbreak of the COVID-19 pandemic in early 2020 brought an unexpected surge to video consultation services. In February 2020, due to the impact of the epidemic, medical aesthetic institutions across China saw nearly no revenue; however, users on SoYoung initiated 40,000 video consultations online, with the actual number of completed consultations increasing by 134% compared to January. During the epidemic, SoYoung served as a “reservoir” for medical aesthetic institutions.

The second strategic adjustment for the community is to activate the driving effect of key opinion leaders (KOLs). To this end, in March 2019, SoYoung introduced hundreds of top-tier KOLs in aesthetics, medicine, beauty, and fitness to jointly build a high-aesthetic-intelligence community.

The third strategic adjustment for the community is to improve the efficiency of information presentation on the platform. In August 2019, So-Young launched a facial recognition authentication system, introduced user behavior characteristic analysis algorithms from the financial industry’s credit reporting system, and established the first risk index alert for medical aesthetic users. In March 2020, So-Young further stratified the content of its “Beauty Diaries.” Users who write Beauty Diaries and upload relevant purchase receipts will have their entries tagged as “Post-Purchase Diaries” and given priority placement in the information feed.

From the three major directions of community adjustment outlined above, it is evident that So-Young’s community development strategy aims to deepen its competitive moat in terms of content professionalism, richness, and authenticity, enabling users to easily and safely access all stages of the full consumer lifecycle in medical aesthetics throughout their decision-making process.

Medical aesthetics possesses both consumer and medical attributes. The uneven quality of practitioners necessitates a prudent and protracted evaluation process for potential customers before they ultimately make a purchase decision.

SoYoung’s current content ecosystem features broad coverage, a rich array of content products, and a closed-loop consumption model. Users can perceive medical aesthetics as an emerging consumer trend through new media, simulate their beauty enhancement journey using mini-tools, engage with the consumer community, and consult doctors via video consultations and online Q&A to access cost-effective information and services. They then generate new community content, attracting more potential consumers to participate in discussions, thereby creating a positive feedback loop.

On one hand, China’s medical aesthetics market is vast. According to research by the internationally renowned analytics firm Frost & Sullivan, nearly 20 million people consumed medical aesthetic services in 2020, with a consumer penetration rate of only 1.43%. Demand for medical aesthetics in cities below the second tier remains largely untapped.

On the other hand, the broader consumer healthcare market—encompassing sectors such as dentistry, ophthalmology, health screenings, and obstetrics—also faces challenges including uneven quality among service providers, high-involvement consumer decision-making, and demand for consumption upgrades. SoYoung’s content ecosystem, e-commerce operations system, and professional medical community atmosphere are equally applicable to these consumer healthcare segments, which represent a market valued at trillions of yuan.

SoYoung’s vision is to become the most trusted consumer healthcare technology company. With vast growth potential, a proven business model, and the team’s efficient execution, SoYoung is well-positioned for sustained rapid performance growth.

In addition to its product portfolio, the company also places significant emphasis on talent acquisition. Following the appointment of renowned author and Senior Managing Director at CITIC Capital, Mr. Feng Tang, to SoYoung’s Board of Directors in December 2019, Mr. Cai Rui, former Senior Director of Commercialization at Autohome, announced in March 2020 that he had joined SoYoung as Vice President of the Commercial Product Center. He became the fifth executive at the vice-presidential level or above to join SoYoung since 2019. If SoYoung was previously regarded as the “Whampoa Military Academy” of China’s medical aesthetics industry, it is now attracting high-caliber internet talent to the sector, working together to build a consumer healthcare ecosystem.

In December 2019, seven investment research institutions, including Citibank, issued price target forecasts for So-Young’s stock, with an average target price of $17.09, a low of $14.50, and a high of $20.00. All seven institutions assigned a “Buy” rating to So-Young’s stock.