It is widely anticipated that Xiaohongshu will witness another surge in revenue in 2024. However, at the onset of this year, as an autonomous social media platform, Xiaohongshu confronts fresh challenges stemming from the impact of AI and the trend of international expansion on its community product format.

The market is inclined to believe that Xiaohongshu's momentum in 2024 is bolstered by multifaceted data: Foreign media previously reported that Xiaohongshu's revenue soared to $1 billion in the first quarter of 2024, marking a 67% year-on-year increase, with a net profit of $200 million. Additionally, rumors suggest that Xiaohongshu's daily search volume reached nearly 600 million in the fourth quarter of 2024, doubling from the middle of last year. Post-Singles' Day, Xiaohongshu released its sales report, revealing that "the number of merchants with transactions exceeding 10 million yuan is 5.4 times that of last year."

In Xiaohongshu's revenue mix, advertising accounts for the lion's share. In terms of business segments, e-commerce and local living are the primary sectors. The distinctive community ecosystem serves as the pivotal foundation supporting these business logics and revenue growth.

Nevertheless, with the platform's evolution and the emergence of new trends, AI is currently affecting Xiaohongshu's community ecosystem. At the revenue level, the significant growth levers for both the e-commerce and local living industries have originated from new overseas expansions. Xiaohongshu is unmistakably entering an era characterized by the 'three bodies' of community development, AI, and international expansion.

In fact, other e-commerce or social platforms are also encountering similar or partial scenarios. However, compared to them, Xiaohongshu's pivot is still "small" while the trends are sufficiently "large." After a smooth ride in 2024, the uncertainties that Xiaohongshu will confront this year are escalating.

01. Community and AI: Product Compensation Amid Content Advantages

Xiaohongshu's highly vertical and user-centric traffic distribution approach fosters a rich, diverse, and authentic content ecosystem, which constitutes its strength. However, beginning this year, the compensation for this strength has become increasingly evident.

While Xiaohongshu's revenue and search scenario user growth were substantial last year, corresponding voices emerged: There are increasingly more hidden advertisements on Xiaohongshu, particularly in search scenarios, making them increasingly difficult to discern.

Xiaohongshu users have a deep-seated need for authentic and engaging content. However, "commercialization" can relatively diminish this sense of authenticity, which explains the slow progress of Xiaohongshu's content commercialization in recent years. It is only because Xiaohongshu possesses a long-established content ecosystem that it could withstand the scrutiny amidst last year's robust commercialization drive.

Nonetheless, the new trend of AI application amplifies concerns regarding the imbalance of content authenticity at the product level.

From Xiaohongshu's overall AI product logic, its current AI endeavors are primarily undertaken under the brand name of "Dian Dian." Not only has an independent Dian Dian app been launched, but the entry to Dian Dian is also being integrated into the main Xiaohongshu platform.

In fact, such a highly vertical content ecosystem with traffic skewed towards everyday users originally made Xiaohongshu highly suitable as a testbed for community AI interaction functionalities.

Recently, Xiaohongshu's Dian Dian comment bot was introduced, enabling users to @ Dian Dian in the comment section and input simple commands to receive replies from Dian Dian.

However, after only about one or two days, the "Dian Dian" reply bot in the Xiaohongshu comment section ceased responding. But this is not the first time users have interacted with AI functionalities together in the comment section on Xiaohongshu.

When TikTok refugees flooded into Xiaohongshu earlier this year, Xiaohongshu hastily introduced a translation function, originally intended to facilitate better communication and interaction among netizens from different countries. However, netizens discovered a novel way to use it: by inputting commands in other languages, when users click the translation button, the translation function not only translates the content (including internet memes, dialects, etc.) but also reads and executes some commands.

At that time, DeepSeek had not yet gained widespread attention, and many users who typically do not pay close attention to AI first experienced here how "large models" are transforming the way online users obtain information, while also adding a layer of fun to user interactions.

Whether it's the brief appearance of the Dian Dian comment bot or users playing with the AI translation feature, it feels more like a "product launch event" for Xiaohongshu. However, the incompatibility between Xiaohongshu's content ecosystem and AI implementation is intensifying.

An earlier article in "New Standpoint," titled "In 2025, Who is Most Likely to Become China's Reddit in the AI Era," mentioned that Weibo users do not seem to reject their content being used to generate AI content. Weibo's comment bot "Robert" serves as a prime example. However, this is not the case for Xiaohongshu.

From the creators' perspective, the more authentic the content, the more they aspire to bring value to other users, and correspondingly, they will be more resistant to AI. This applies not only to text creators but also to visual creators.

After Dian Dian was integrated into the Xiaohongshu comment section, creators in the graphic design field have already proposed reflections such as "Methods to Address Dian Dian AI Stealing OC Images." In the anime field, creators feel a particularly strong sense of "discomfort" with the integration of AI into the graphic-text community.

From the users' perspective, there is an increasing amount of AI-generated content on the platform. While this is true for all social platforms, Xiaohongshu users are bound to be more sensitive to this trend.

Furthermore, integrating AI into the platform implies that it may crawl the corpus information of Xiaohongshu users. Xiaohongshu's vertical content from everyday users has always had a strong sense of "emotional divergence" or "human-machine" interaction. If Xiaohongshu trains its own AI based on the platform's text content, it will be difficult to escape Xiaohongshu's content style.

According to the author's observation, Xiaohongshu's Dian Dian is not yet mature, and the information that can be invoked in the generation results is limited. Compared to Weibo's AI Smart Search and X's Grok, it still requires further improvement. Xiaohongshu still has room for trial and error.

However, the attribution of note content and AI invocation, the user ecosystem's pursuit of authenticity, and AIGC are difficult to be compatible... Perhaps these compensations will also exist on other social platforms, but they may be more pronounced on Xiaohongshu.

02. Ecosystem and Going Overseas: Conservatism of Merchants and Ambition of the Platform

E-commerce and local living are the primary revenue-generating business models of Xiaohongshu. From an industry perspective, the largest growth opportunities for these two businesses have all stemmed from the new wave of international expansion.

In recent years, for major platforms, e-commerce and local living businesses have always been intertwined. Taking JD.com, Douyin, Taobao, and Meituan as examples, the movements of these large companies are leading the era. The explorations of these players from the second half of last year to this year have naturally become observation windows for the new wave of international expansion.

Multiple articles in "New Standpoint" during the same period have examined this: On the JD.com front, logistics infrastructure is expanding overseas, coupled with local living strategies targeting Meituan to capture the existing market; on the Douyin front, TikTok is experimenting with local living group-buying businesses overseas (despite bans, it is still exploring the business); on the Taobao front, as a veteran in e-commerce international expansion, it is further integrating domestic and international e-commerce operations; Meituan, first in Hong Kong and then the Middle East, is in full swing in its exploration of international expansion.

With the domestic e-commerce and local living markets becoming increasingly competitive and requiring gradual integration, Xiaohongshu naturally follows these players and also shifts its focus overseas.

The influx of TikTok refugees and Xiaohongshu's app topping the app download charts in numerous countries or regions worldwide have firmly established Xiaohongshu's confidence in international expansion. In early March, Xiaohongshu's "Xiaohongshu E-commerce Going Overseas Navigation Plan" for merchants symbolized its official entry into international expansion.

This plan targets solutions for international expansion, integrating full-link services such as online transactions, trade exports, cross-border payments, and localized operations to assist merchants in reaching global users. After signing an agreement to become an overseas merchant, they can leverage Xiaohongshu's content ecosystem for diverse displays in fields like notes, live streaming, and stores.

However, unlike other large companies engaged in e-commerce and local living, Xiaohongshu's primary business pivot is content, but its content ecosystem nurtures "small and beautiful" merchants. Such merchants may not necessarily have a strong appetite for international expansion. A Xiaohongshu user claiming to be a merchant said they felt perplexed about Xiaohongshu's invitation to go overseas.

While such merchants may be individual cases, on the whole, merchants that align with Xiaohongshu's tone either wish to focus solely on "small domestic businesses" or have already ventured overseas with the assistance of other platforms. Xiaohongshu needs to dedicate more effort specifically to cultivating the overseas awareness of this type of merchant.

Nonetheless, because of this, Xiaohongshu has also taken the lead in leveraging the advantages of "small and beautiful" categories.

Some merchants shared with the media that Xiaohongshu is currently selecting products, primarily focusing on the field of daily consumer goods, including home textiles, home furnishings, footwear, clothing, bags, and small appliances. Among them, handicrafts and DIY products have garnered significant attention.

Combining the above, Xiaohongshu's business logic post-international expansion is actually akin to that of the foreign content platform Instagram, both emphasizing graphic-text content + e-commerce advertising, with product categories tending to favor personal IP small goods, i.e., "cultural" types of goods.

In addition, domestic e-commerce platforms have ample experience in exploring "full trusteeship" and "semi-trusteeship" models for international expansion. Xiaohongshu has sufficient experience to draw upon, and the fusion of Chinese internet thinking and Instagram's business logic may lead to distinct developments.

Considering the rising trend of the East and the declining influence of the West, coupled with the initial "seeding" of Xiaohongshu's platform itself by global users earlier this year, there are indeed prospects for Chinese cultural small goods to venture overseas backed by graphic-text content platforms. Xiaohongshu may also value this trend and its degree of alignment with its own business logic.

On the other hand, Xiaohongshu, without any infrastructure capabilities, will also face more constraints when expanding overseas.

Currently, logistics companies such as JD.com and Cainiao have deeply established their presence overseas, giving JD.com and Alibaba's e-commerce businesses the confidence to face a shifting international landscape. Meituan's local living international expansion is also supported by its drone business, as well as its ground promotion team, rider team, and front warehouse construction capabilities. From these perspectives, Xiaohongshu is indeed still "small" in the face of the rolling tide of the times.

03. Written at the End

The three-body problem in classical physics illustrates that the gravitational interaction between three celestial bodies is nonlinear, and the equations of motion are exceedingly complex. Unlike the two-body problem (such as the motion of the Earth around the Sun), the motion of a three-body system is easily influenced by minor changes in initial conditions, exhibiting chaotic characteristics. Even if the initial conditions are very close, over time, the trajectories of the celestial bodies will diverge significantly.

Liu Cixin's science fiction series "The Three-Body Problem" visualizes how this physical problem impacts civilizations. Faced with the chaotic motion changes of the three stars above their heads, the evolution process of the Trisolarans' civilization also becomes chaotic.

Currently, the three major trends in the internet are: users at the content layer pursue authenticity, enterprises at the application layer pursue the implementation of AI applications, and businesses further expand overseas to find incremental growth.

Previously, there was only one star shining brightly on Xiaohongshu for a long time: users' pursuit of authentic and engaging content driving the development of e-commerce and local living. Now, the second and third stars have emerged successively. Building on the momentum from 2024, the still "small" Xiaohongshu aims to seize opportunities, and its explorations in various aspects may enter a period of "chaos," while other large companies seem closer to the "Singer" civilization and will not encounter such troubles.

Fortunately, Xiaohongshu has always excelled at "taking time to do things well."

*The lead image and images in the text are sourced from the internet.