Company also reveals some of its businesses can break even by 2017
Young women love to take selfies and they love to look great in those selfies, hence the growing popularity of image optimization apps developed by Meitu Inc.
But whether or not the tech firm, which is seeking one of the largest initial public offerings in Hong Kong in nearly a decade, can successfully turn women's desire to look good into real cash remains doubtful, said analysts.
In a document filed to the Hong Kong exchange on Monday, Xiamen-based Meitu outlined a diversified monetization strategy, trying to use not only smart hardware and internet value-added services, but also online advertising and e-commerce to make money.
"Our business model is to focus initially on engaging a large user base with innovative products and services free of charge, followed by the implementation of various monetization strategies when we reach significant scale," said the company in the document.
Meitu's apps have gathered about 456 million monthly active users by October by helping them appear more attractive in photos and videos via slimming faces, buffing skin, lengthening limbs and even applying makeup.
Founded in 2008, the company had about 97 percent of its revenue coming from smart hardware by the end of September.
Meitu's colorful-looking smartphones, priced between 1,500 yuan ($210) and 2,000 yuan, are designed to appeal to women who want to take flattering photos.
James Yan, research director at Counterpoint Technology Market Research, said that female smartphone users can be a promising niche market for Meitu.
"But a broadened monetization strategy is necessary for Meitu because the smartphone business alone cannot bring big profits due to fierce market competition," Yan said.
Meitu said it will upgrade its online advertising platform by the end of 2016 and launch an e-commerce platform enabling users to shop for fashion-related merchandises in mid-2017 in its latest effort to broaden its moneymaking channels.
The company also revealed that it is expected to break even by the end of 2017 for some of its businesses. With an investment of more than 176 million yuan, its e-commerce business is expected to break even between 18 months and 30 months after its launch in July 2017.
Lu Zhenwang, an internet analyst based in Shanghai, said owning a large user base does not equal a successful e-commerce business.
"What Meitu provides are essentially tools to help people make nice photos. Meitu's apps are not like WeChat, in which people spend a great deal of their social life. Most of Meitu users spend one or two minutes optimizing their photos and then leave the apps when they are done with their photos. You can hardly monetize them into a big lucrative business," he said.
Previous reports said that Meituis seeking a $710 million IPO in mid-December. Morgan Stanley, Credit Suisse Group AG and China Merchants Securities Co are joint sponsors of the offering, according to a prelisting filing with the Hong Kong Stock Exchange in August.
