(Yicai) Nov. 21 -- Kuaishou Technology’s shares sank after the Chinese short-video platform posted slower profit growth in the third quarter.

Kuaishou [HKG: 1024] closed 11.7 percent lower at HKD46.40 (USD5.96) a share in Hong Kong today. The stock is down about 12 percent since the end of last year.

Net profit jumped 50 percent to CNY3.3 billion (USD455.7 million) in the three months ended Sept. 30 from a year earlier, the Beijing-based company said in a financial statement yesterday. It had soared 167 percent in the second quarter.

The rival of Douyin, TikTok’s sister app in China, reported that its e-commerce gross merchandise increased by less than 20 percent for the second straight quarter, rising 15 percent to CNY334.2 billion (USD46.1 billion), with monthly active buyers up 12 percent to 133 million.

The e-commerce business “demonstrated its differentiation and resilience despite the third quarter being a traditionally slow season for e-commerce and ongoing challenges in consumer demand,” the firm said, adding that key drivers included refocusing on livestream e-commerce, unlocking short video e-commerce potential, and expanding pan shelf-based e-commerce.

Revenue Growth

Third-quarter revenue rose 11 percent to CNY31.1 billion (USD4.3 billion), with online marketing services, livestreaming, and other businesses contributing 57 percent, 30 percent, and 13 percent, respectively. Income from online marketing services jumped 20 percent to CNY17.6 billion, primarily driven by external marketing clients.

“In line with our strategy to promote high-quality user growth, we enhanced our capabilities in leveraging marketing channels for user acquisition and optimized product features, while integrating user acquisition initiatives with commercial scenarios such as e-commerce,” it noted.

“These efforts enabled us to expand our user base and enabled more users to access our products more frequently,” the firm said. Kuaishou's average daily and monthly active users rose 5.4 percent and 4.3 percent to 408 million and 714 million.

“We accelerated the implementation of the in-apps advertising short play model, expanding our user base for free short plays,” it said. “These efforts contributed to a more than three-fold year-over-year increase in short-play marketing spending during the same period.”

Revenue from livestreaming fell 3.9 percent to CNY9.3 billion, but the year-on-year decline continued to narrow. “As an instrumental component of our content ecosystem and ongoing driver of user engagement, we remain focused on fostering a healthy, sustainable live-streaming ecosystem,” Kuaishou pointed out.

Revenue from other services climbed nearly 18 percent to CNY4.2 billion, primarily driven by e-commerce growth.

“On the supply side, the number of average monthly active merchants increased by over 40 percent year-over-year in the third quarter,” Kuaishou said. “"mall- and medium-sized merchants' performance on our platform exceeded expectations thanks to our strategic new merchant programs.”

AI Progress

Kuaishou continued to enhance its AI capabilities by integrating and applying large models for content creation, understanding, and recommendation, strengthening both its content and commercial ecosystem, the company stated.

Kuaishou continued to advance the integration and application of artificial intelligence models for content creation, understanding and recommendation, empowering its content and commercial ecosystem, the company said.

Average daily spending with AI-generated content marketing materials from marketing clients surpassed CNY20 million (USD2.8 million) in the quarter.

Kuaishou's AI initiative Keling AI has served more than five million users, generating 51 million videos and 150 million images since launching in June Keling AI's monthly commercial revenue exceeded CNY10 million, Chief Executive Cheng Yixiao said on the firm’s earnings conference call.

Regarding short dramas, Cheng said that as the content ecosystem is enriched, Kuaishou's 500 million-plus user base presents further commercialization potential and leaves room for penetration rate improvement.

Editor: Futura Costaglione