Keep tries to form a closed-loop consumption chain of “eating, wearing, using and practicing”, but every link of this closed-loop is full of competitors.

Cartography | Cheng Xing

On February 25, keep, a fitness technology company, officially submitted a prospectus to the Hong Kong stock exchange for listing on the main board.

Keep was founded in 2014 - that was the era when the domestic entrepreneurial tide was the most enthusiastic. There were a large number of science and Technology entrepreneurial projects that tried to transform all kinds of traditional offline service industries with “mobile Internet thinking”. It was relatively easy to see the pain points of users, but most products were on the way of difficult exploration of business models.

Around the online sports and fitness services, a number of apps have also emerged, and their functions are basically concentrated in two parts: the online sharing platform of fitness teaching content and sports management tools.

From the naming of app to slogan such as “self discipline gives me freedom”, keep is the most “model” of dozens of fitness apps emerging at the same time. Therefore, it has successfully completed the accumulation of early users among young people in first tier cities, and obtained several rounds of financing involving star VC such as Bai, Jiyuan capital and Tencent in the first three years of entrepreneurship.

By January 2021, when keep announced the completion of the last round of financing before IPO, it disclosed that the scale of registered users had exceeded 300 million. In the prospectus released at the end of last month, keep called itself the “largest online fitness platform” in China and the world, and disclosed that the average number of monthly active users in 2021 was 34.4 million (including 328000 monthly paying users). Relying on this user base, keep achieved a revenue of 1.159 billion yuan in the first three quarters of 2021.

The above set of data is enough for us to clearly see that as a head exercise and fitness app, the precipitation of the actual users of keep and the commercial value thus transformed do not seem to be a light business of “four or two kilos”.

Like other Internet platforms, as an internet tool product, keep also needs to take traffic as the fulcrum to find a feasible value-added service model. In order to continuously gather users and find a stable and promising business model, keep has continuously adjusted its product strategy and expanded its service boundary in the past 8 years. The whole process is not easy. It is not until the first half of 2021 that keep’s overall business logic and commercialization exploration enter a stable period.

Of course, as an external factor, the epidemic has also played a great role in boosting the growth of keep since 2020.

In the first three quarters of 2021, keep’s sales and marketing expenses reached 818 million yuan, 4.42 times that of the same period of last year. The proportion of relevant expenses in the company’s total revenue directly increased to 70.6% from 22.6% in the same period of the previous year. Keep describes it as “strategically deciding to increase spending on user acquisition and brand promotion”. Keep began to burn a lot of money, which is not only that the business architecture has gradually matured, but also to accelerate the listing process. From round a to round F, keep raised more than 4 billion yuan. IPO is the only way for these investors to get off safely.

But when it comes to the company’s future growth space, especially the profit expectation, the answers to many questions are not clear enough. In other words, the current keep is far from being able to breathe a sigh of relief.

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Difficult commercialization exploration

Yimagazine disclosed keep and its “business addition and subtraction method” in its report in 2019 (read here). In short, keep has made such explorations: from being a fitness tool to becoming a fitness consumer brand, from realizing online content production to developing offline space, from providing fitness software services to peddling fitness hardware In October 2020, Liu Dong, executive director and co-founder of keep, explained in an interview with yimagazine that it is possible to compare Xiaomi style brand ecological chain with mobile phone as the core, but the core of keep is “fitness”. The goal is to use the “keep fit” tool to get and practice fitness. “Take fitness tools, treadmills and other products as the drainage entrance, and then complete the renewal and re purchase of food, clothing and other products, with the cooperation of high gross profit and low gross profit.”

Dismantling the revenue structure of keep, we can see that its revenue sources are mainly three parts: member subscription and online paid content, private brand products, advertising and other services.

Advertising, e-commerce products, course fees and event services are the revenue means adopted by most apps on the market.

Keep’s course fees and event services can bring limited cash flow. Although advertising services can be used as a source of revenue, they also need to balance the contradiction between brand owners and users, otherwise it is very easy to hurt the user experience. Therefore, keep’s clear profit model is consumer goods and members. “In terms of scale, consumer goods will be larger, but its gross profit is certainly not as high as that of member business.” Liu Dong said in a previous interview.

At present, the sales of private brand products is the main revenue engine of keep. According to the prospectus, in the first three quarters of 2021, the revenue of keep’s private brand products, member subscriptions and online paid content, advertising and other services accounted for about 5:3:1. Private brand products include smart fitness equipment and fitness equipment sold by keep on its own mall and third-party e-commerce platforms, as well as clothing, food and other branded products.

In other words, keep is a company that relies on the flow of fitness content app to complete the brand out of the circle, and then mainly relies on selling fitness equipment and related consumer goods for profit.

In terms of the positioning of consumer goods, keep uses its brand power to seize users who have both functional quality and price demands, and to some extent avoid duels with major brands and tonal products. Liu Dong told yimagazine that the pricing of keep consumer goods is at the second peak - the price is lower than big brands, but higher than Taobao and other brands.

The idea of keeping consumer goods is obvious. Pricing first, and then find a balance between user needs, functions and costs. Highlight keep consumption