How lonely is China’s Gen Z? Tencent-backed social networking app Soul pops the question as it files for Hong Kong IPO


Soulgate, the Tencent Holdings-backed operator of Soul, an app that helps China’s Gen Z make friends, has filed for listing in Hong Kong after officially ending its IPO project last month. on the stock market in the United States.

Soulgate’s market debut will be a test of whether investors have any appetite for a company based on lonely hearts and temperamental but digitally savvy Chinese youth.

Since its launch in 2016, Soul has gained popularity among Chinese Generation Z, which includes teenagers and people in their early twenties, allowing like-minded users to connect quickly. According to a prospectus filed last week, the app lost 1.32 billion yuan ($197 million) in 2021 and has 9.3 million daily active users.

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Li Chunjiao first met the man who became her husband on a digital square – which looks like Instagram’s Explore – in the Soul app in 2020. Her first comment was, “I think you look great “. They started chatting and then exchanged contact details. They talked for hours on the phone over the next few months before finally meeting in person for the first time.

“I was single and stressed out from work when I started using Soul in 2018, I also had a paid subscription to see how many people visited my profile,” Li said.

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However, after getting married, Li and her partner stopped using the app – and that’s a love-hate reality that Soulgate has to deal with when it comes to its user base.

Love, because a successful couple reinforces the brand image of the company as a place where one can find a life partner; hate, because once the user reaches their goal, they stop using and paying for the app.

Soul is marketed as an “algorithm-based virtual social playground where people can create, share, explore and connect”. Unlike other well-known dating apps like Tinder or Coffee Meets Bagel, Soul doesn’t ask users to upload their photos or swipe left or right.

Users who want to talk can match with other strangers online and start a conversation via text or phone – and who you match with is decided entirely by an algorithm, based on your specific interests and location.

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The app has not escaped the impact of China’s regulatory crackdown on the internet, however.

In 2019, Soul was taken off the market for three months by order of the Cyberspace Administration of China for allegedly disseminating information containing “soft pornography”. And the company’s aborted plan for a Nasdaq listing was hampered by media reports that users had complained of verbal sexual harassment of underage users on the platform.

Meanwhile, Soulgate is being sued by rival social media app Uki, which in 2021 accused it of unfair competition. Uki said two Soulgate employees posted pornographic images on Uki’s platform and then reported the breach. As a result, Uki was removed from app stores for three months. The two employees were found guilty but they acted “without our authorization”, Soulgate said in its Hong Kong prospectus, adding that the case is still pending and that the plaintiff is seeking 26.9 million yuan in compensation.

The lawsuit could slow Soul’s IPO process, said Zhu Xiaowen, an analyst at research firm LeadLeo. “Whether [the lawsuit becomes a problem] Soul may miss the best time to go public, and three years of continuous losses may discourage investors,” Zhu said.

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The soul, in which Genshin Impact Game developer miHoYo has a minority stake, has grown from a niche app to a Gen-Z behemoth. With the rise of the metaverse concept, it now wants to be seen as the “social metaverse for young people” – as its landing page states – instead of just a place where users can meet your soul mate, as previously stated by marketing.

It now also offers Clubhouse-style audio chat rooms, which require users to verify their true identity before joining. Each room has a topic to discuss, such as “let’s talk about things you can’t share in your real life” or “why girls are only interested in love but not marriage”.

One user, who is a member of the LGBT community and asked not to be identified for personal reasons, started using Soul in late 2019 when Covid-19 began sweeping China. He said he mainly uses it for phone sex and enjoys how each user can remain unknown to the other.

China’s strict zero Covid policies, including mass shutdowns, have fueled demand from young people stuck at home in quarantine to connect with others online. Between 2019 and 2021, Soul’s monthly active users nearly tripled from 11.5 million to 31.6 million, according to company information.

At the end of 2021, its 9.3 million daily active users spent an average of 45.3 minutes on the app each day, representing a 55.8% year-over-year increase, according to the Soulgate prospectus.

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From 2019 to 2021, the company’s annual revenue was 70.7 million yuan, 498 million yuan, and 1.281 billion yuan respectively. It reported a total net loss of 2.2 billion yuan for the three years combined, according to its prospectus.

LeadLeo’s Zhu said Soul’s monetization channels remain limited.

“Soul’s marketability remains weak…without constant innovation, it’s hard to attract inherent groups to rejuvenate,” Zhu said.

But other analysts take a more positive view.

“At this point in the metaverse journey, it’s a challenge for anyone to break even,” said Mark Tanner, managing director of Shanghai-based agency China Skinny. “I expect transactions to grow naturally in later stages with information, more users, and greater competition among users to encourage more spending and demand for exclusive experiences.”

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