Zhihu

Prospectus Summary

PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ADSs discussed under “Risk Factors,” before deciding whether to invest in our ADSs. This prospectus contains information from an industry report and a survey commissioned by us and prepared by China Insights Consultancy, or CIC, an independent research firm.

Overview

“Do you know?”

The question is embedded in Zhihu ( )’s Chinese meaning.

A question is not only a yearning for the undiscovered, but also the start of a journey to learn, engage, and share. Zhihu is an iconic online content community where people come to seek inspiration, find solutions, make decisions, and have fun. On Zhihu, our users explore and enjoy a variety of content from daily lifestyle and entertainment topics such as selecting the best tech gadgets or discussing the most popular games and videos, to sophisticated knowledge and experience such as understanding high-energy physics or alpine skiing, and to preparation for life events and decisions such as finding the right career, starting a family, or expecting a baby. Zhihu has attracted a wide array of content creators, including individuals giving firsthand accounts of their unique experiences, tutors providing valuable exam preparation tips, and hobbyists sharing their expertise. Zhihu goes beyond that first question, and brings people together through their common interests.

What is our mission?

We believe that everyone has a wealth of knowledge, experience, and insights irrespective of background or education. We also believe that people desire to enrich themselves while pursuing their interests, academics, careers, and passion.

Our mission is to empower people to share knowledge, experience, and insights, and to find their own answers.

What makes Zhihu great?

Zhihu is the largest Q&A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC. Zhihu is also recognized as the most trustworthy online content community and widely regarded as offering the highest-quality content in China, according to the CIC Survey. We pride ourselves as a “marketplace of answers,” steadily accumulating trustworthy content through continuous creation and engagement among our users and content creators over a journey of more than ten years. As of December 31, 2020, we had 43.1 million cumulative content creators, who had contributed 315.3 million questions and answers. Our 75.7 million average MAUs in the fourth quarter of 2020 generated 675.7 million average monthly interactions within our vibrant community during the same period.

Since our inception, we have worked relentlessly to develop Zhihu into a trustworthy content community. Our users and content creators continuously nurture our community and unique content ecosystem; our ecosystem reinforces our culture and upholds our values; and our culture and values attract and retain more users and content creators. This virtuous cycle allows us to amass the collective intelligence of tens of millions of users and content creators, leading to a “wisdom of the crowd” that delivers a fulfilling Zhihu experience.

Our business is underpinned by the following pillars:

and engage while respecting diversity and valuing constructiveness. Embracing all of these values, our Zhihu brand represents trustworthiness in the Chinese internet world.

What have we accomplished?

We started Zhihu as a Q&A-focused online content community a decade ago. Today, Zhihu is the largest Q&A-inspired online community and one of the top five comprehensive online content communities in China, both in terms of average mobile MAUs and revenue in 2020, according to CIC.

As of December 31, 2020, we had accumulated 315.3 million questions and answers contributed by our 43.1 million content creators. Our average MAUs increased by 33.0% from 56.9 million in the fourth quarter of 2019 to 75.7 million in the fourth quarter of 2020.

We are still in an early stage of monetization, with significant runway for growth across multiple new monetization channels. We started to offer online advertising in 2016, introduced paid content in 2018 and our paid Yan Selection membership program in the first half of 2019, and formally launched our content-commerce solutions in early 2020. We continued to expand our content-centric monetization channels in 2020, including offering online education and e-commerce related services. Our revenue increased from RMB670.5 million in 2019 to RMB1.4 billion (US$207.2 million) in 2020. Our net loss was RMB1.0 billion in 2019 and RMB517.6 million (US$79.3 million) in 2020.

Our Market Opportunities

China’s online content market consists of online content communities primarily offering user-generated content (UGC), and other players such as platforms offering professionally generated content (PGC). The market size of China’s online content community in terms of revenue increased from RMB38.6 billion in 2015 to RMB275.8 billion in 2019, and is expected to further increase to RMB1.3 trillion in 2025, representing a CAGR of 30.3% from 2019, outgrowing the overall online content market. The user base of online content community in China has also expanded significantly from 516.2 million in 2015 to 773.0 million in 2019, and is expected to reach 1.0 billion in 2025, according to CIC.

The monetization of China’s online content community market is still in an early stage with significant growth potential. Revenue per user of China’s online content communities was RMB356.7 in 2019, growing five fold since 2015, and is expected to further increase to RMB1,292.4 in 2025, representing a CAGR of 23.9% from 2019.

In addition, online content communities covering a broad spectrum of content verticals which are referred to as comprehensive online content communities, such as companies like Zhihu, are expected to outgrow online content communities focusing on certain verticals in terms of both user base and revenue.

Our Strengths

Our Strategies

Corporate History and Structure

Our founder, Mr. Yuan Zhou, founded Zhihu in late 2010. Between 2010 and 2012, Zhihu was a by-invitation-only, Q&A-focused online content community. We opened up registration to the general public in 2013 and have since then grown into one of the largest comprehensive online content communities in China. We started to offer online advertising in 2016, introduced paid content in 2018 and our paid Yan Selection (盐选) membership program in the first half of 2019, and formally launched our content-commerce solutions in early 2020. We have continued to expand our content-centric monetization channels since 2020, including offering online education and e-commerce related services.

We raised capital through seven rounds of equity financing since our establishment, with the most recent round raising over US$400 million in 2019.

The following diagram illustrates our corporate structure, including our principal subsidiaries and our VIE, as of the date of this prospectus.

Notes:

interest in Zhizhe Tianxia. Four other beneficial owners of our company, namely, Beijing Chuangxin Fangzhou Technology Co., Ltd., Xiamen Siyuan Investment Management Co., Ltd., Shenzhen Litong Industry Investment Fund Co., Ltd., and Beijing Sogou Information Services Co., Ltd., hold an aggregate of 41.5% of the equity interest in Zhizhe Tianxia.

Our Cayman Islands holding company was established in May 2011. We gained control over Beijing Zhizhe Tianxia Technology Co., Ltd., or Zhizhe Tianxia, through Zhizhe Sihai (Beijing) Technology Co., Ltd., or Beijing WFOE, by entering into a series of contractual arrangements with Zhizhe Tianxia and its shareholders. As a result of our direct ownership in Beijing WFOE and the contractual arrangements with Zhizhe Tianxia, we are regarded as the primary beneficiary of Zhizhe Tianxia, and we treat Zhizhe Tianxia as our consolidated VIE under U.S. GAAP. We have consolidated the financial results of our VIE and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP.

Summary of Risk Factors

Investing in our ADSs involves significant risks. You should carefully consider all of the information in this prospectus before making an investment in our ADSs. These risks are discussed more fully in the section titled “Risk Factors.”

Risks Relating to Our Business and Industry

Risks and uncertainties related to our business and industry include, but are not limited to, the following:

Risks Relating to Our Corporate Structure

We are also subject to risks and uncertainties related to our corporate structure, including, but not limited to, the following:

the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Risks Relating to Doing Business in China

We face risks and uncertainties related to doing business in China in general, including, but not limited to, the following:

Risks Relating to Our ADSs and This Offering

Risks and uncertainties related to our ADSs and this offering include, but are not limited to, the following:

Implication of Being an Emerging Growth Company

As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements compared to those that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. Pursuant to the JOBS Act, we have elected to take advantage of the benefits of this extended transition period for complying with new or revised accounting standards. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the preceding three-year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our ADSs that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

Implication of Being a Foreign Private Issuer

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers. Moreover, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. In addition, as a company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the New York Stock Exchange corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the New York Stock Exchange corporate governance listing standards. Currently, we do not plan to rely on home country practices with respect to our corporate governance after we complete this offering.

Corporate Information

Our principal executive offices are located at A5 Xueyuan Road, Haidian District, Beijing 100083, People’s Republic of China. Our telephone number at this address is +86 (10) 8271-6605. Our registered office in the Cayman Islands is located at offices of Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.zhihu.com. The information contained on our website is not a part of this prospectus.

Conventions That Apply to This Prospectus

Unless we indicate otherwise, all information in this prospectus assumes no exercise by the underwriters of their option to purchase up to additional ADSs representing Class A ordinary shares from us.

Except where the context otherwise requires, and for purposes of this prospectus only:

In this prospectus, city tiers are determined based on a study published in 2017 by China Business Network, a finance media company in China. In particular, tier 1 cities refer to Beijing, Shanghai, Shenzhen, and Guangzhou; new tier 1 cities refer to Chengdu, Chongqing, Hangzhou, Wuhan, Xi’an, Tianjin, Suzhou, Nanjing, Zhengzhou, Changsha, Dongguan, Shenyang, Qingdao, Ningbo, and Dalian; tier 2 cities refer to Kunming, Fuzhou, Wuxi, Xiamen, Jinan, Harbin, Wenzhou, Shijiazhuang, Quanzhou, Nanning, Changchun, Nanchang, Guiyang, Jinhua, Changzhou, Huizhou, Jiaxing, Nantong, Xuzhou, Taiyuan, Zhuhai, Zhongshan, Lanzhou, Taizhou, Shaoxing, Yantai, Foshan, Urumqi, Hefei, and Haikou.

Our reporting currency is Renminbi. This prospectus contains translations from Renminbi to U.S. dollars solely for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at a rate of RMB6.5250 to US$1.00, the exchange rate in effect as of December 31, 2020, as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts referred to in this prospectus could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. On February 26, 2021, the exchange rate for Renminbi was RMB6.4730 to US$1.00.