--- title: "Youzan has finally overcome the mountain. Is the 'losing money to gain popularity' SaaS industry about to change?" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/33012874.md" description: "Recently, the SaaS industry in China has seen a warm current. The veteran SaaS service provider Youzan has finally overcome the profitability hurdle. Youzan's mid-term performance report for 2025 shows a net profit of approximately 73 million yuan in the first half of the year, successfully turning losses into profits; operating profit reached 84.09 million yuan, a significant year-on-year increase of 3151.7%. This profitability signal is like a long-awaited rain for the domestic SaaS industry, which has long been struggling in the quagmire of losses. Image source from pixabay image library. Over the past four years, Youzan's revenue has continued to shrink..." datetime: "2025-08-15T09:25:59.000Z" locales: - [en](https://longbridge.com/en/topics/33012874.md) - [zh-CN](https://longbridge.com/zh-CN/topics/33012874.md) - [zh-HK](https://longbridge.com/zh-HK/topics/33012874.md) author: "[港股研究社](https://longbridge.com/en/profiles/3199113.md)" --- # Youzan has finally overcome the mountain. Is the 'losing money to gain popularity' SaaS industry about to change? Recently, the SaaS industry in China has seen a warm current, with veteran SaaS service provider Youzan finally overcoming the mountain of profitability. Youzan's mid-2025 performance report shows a net profit of approximately 73 million yuan in the first half of the year, successfully turning losses into profits; operating profit reached 84.09 million yuan, a significant year-on-year increase of 3151.7%. This profit signal is like a long-awaited rain for the domestic SaaS industry, which has long struggled in the quagmire of losses. Image from pixabay Over the past four years, Youzan's revenue has continued to shrink, with the number of paying merchants halving from a peak of 97,200 to 55,800 in 2024. As the "first stock in the WeChat ecosystem," its market value once reached over 70 billion yuan but has now dwindled to just 4.7 billion. In an industry widely regarded as "losing money to make noise," does Youzan's profitability mean that domestic SaaS has finally found a sustainable business model? **Business optimization, technological empowerment, and service deepening: the three pillars behind profitability** The financial report shows that Youzan achieved revenue of 714 million yuan (RMB, same below) in the first half of the year, a year-on-year increase of 4%. Breaking down the composition of its total revenue, a clear trajectory of business transformation emerges. Revenue from merchant solutions was approximately 338 million yuan, up 10.3% year-on-year; while subscription solutions revenue was about 374 million yuan, down 1% year-on-year. Behind this increase and decrease lies Youzan's strategic focus on high-value-added businesses. Moreover, Youzan is no longer pursuing scale expansion but is instead deepening its presence in high-margin industries such as chain stores and cake baking, providing targeted solutions. The rapid growth of logistics solutions has become the main driver of the merchant services sector, effectively optimizing the revenue structure. Although the gross margin slightly declined from 68.4% in the same period last year to 65.4%, the increased proportion of high-margin businesses laid the foundation for overall profitability. Furthermore, thanks to the large-scale application of AI tools, Youzan has integrated intelligent technology with solutions, creating a range of smart products around three scenarios: "public domain customer acquisition, private domain repurchase, and store operation efficiency improvement." In public domain customer acquisition, the "WeChat Store Hosting" smart agent and "Omni-channel Takeout Hosting" smart agent help merchants open stores across multiple channels; "Youzan Bangbang Tie" and "Youzan Xiaohongshu Local Life Solutions" empower merchants to attract new customers through content marketing. In private domain operations, the "Marketing Expert" smart agent provides precise marketing advice, while the "High-Intent Customer Hosting" smart agent improves repurchase rates. For store efficiency, the "Sales and Customer Service Hosting" smart agent and "Store Smart Assistant" significantly reduce labor costs and improve merchant operational efficiency. Additionally, the most noteworthy metric is the average sales per merchant, which exceeded 930,000 yuan, a year-on-year increase of 11%. This data reflects Youzan's deep exploration of customer value. This change stems from Youzan's tangible improvements in merchant operational efficiency. The financial report shows that in the first half of 2025, Youzan's GMV was approximately 49.8 billion yuan, a year-on-year increase of 31.6%. Store SaaS business accounted for 51% of GMV, showing a steady growth trend. The proportion of physical merchants continues to rise, demonstrating the strategic effectiveness of Youzan's integration from online to offline. Overall, Youzan's performance breakthrough in the first half of 2025 is essentially the result of the synergy between business structure optimization, deep AI empowerment, and customer value mining. At the same time, AI technology has permeated its entire internal and external operational chain, reducing R&D costs and improving efficiency internally, while externally, through a smart product matrix covering "public domain customer acquisition - private domain repurchase - store efficiency improvement," it also confirms the strategic effectiveness of offline physical business integration. **Sustainability of profitability is under scrutiny: what is the "survival" strategy in a red ocean?** Although Youzan's half-year report is impressive, the challenges facing China's SaaS industry are far from over. The current market presents a "double-edged" situation: on one hand, leading companies like Gaotu and NetEase Youdao have achieved profit breakthroughs through AI empowerment; on the other hand, most SaaS companies are still struggling on the profitability line. As the "first stock in the WeChat ecosystem," Youzan must address three core challenges to achieve sustainable profitability: the involution of industry competition, the ceiling of merchant willingness to pay, and the pace of technological iteration. First, the "deep water" competition in vertical industries. A closer look reveals that Youzan's chosen path of "deepening in high-margin industries" is facing increasingly fierce competition. According to the financial report, more than half of Youzan's revenue comes from merchant services, most of which is concentrated in vertical sectors such as retail, catering, and beauty. These are precisely the markets that internet giants and vertical SaaS companies are aggressively targeting. Alibaba, through its "Aoxiang" retail cloud, and Tencent, through its smart retail solutions, are making inroads with their traffic and capital advantages; vertical service providers like Weimob and Keruyun have built more specialized product systems in specific industries. Faced with this "giants ahead, specialists behind" competitive landscape, Youzan's differentiated advantage lies in its omnichannel integration capability—its system can simultaneously cover the entire process of public domain customer acquisition, private domain operations, and store efficiency improvement, which is difficult for single platforms or industry SaaS to replicate. However, maintaining this breadth of technological advantage requires sustained high R&D investment. Balancing innovation with cost control will be a key factor in Youzan's long-term profitability. Second, the localized practice of the "customer success" concept. The low willingness of Chinese companies to pay is a common challenge in the SaaS industry. Youzan is trying to achieve growth by increasing ARPU rather than simply increasing the number of customers. The success of this strategy depends on the quantifiable value brought by deep services. To consolidate this advantage, Youzan is expanding its sales team to 750 people, strengthening pre-sales consulting and after-sales service systems. Although this "customer success" model has higher labor costs, it significantly improves renewal rates and cross-selling opportunities. However, Chinese merchants' understanding of SaaS value still needs cultivation. Youzan executives have stated: "The recovery in growth is not as high as expected because it has just begun," indicating that market education remains a long-term process. **Conclusion** In the long run, the greatest significance of Youzan's 2025 half-year report is that it proves SaaS companies can achieve healthy profitability by deeply exploring customer value and improving efficiency through technology, rather than being trapped in the cycle of "burning money - expanding - burning more money." Youzan has taken the first step, although the road back to its peak remains long. After all, between its current market value of 4.7 billion Hong Kong dollars and its historical high of 70 billion, there remains a fundamental skepticism about the business model of Chinese SaaS. But as AI technology further penetrates, those companies that can deeply integrate technological innovation with business scenarios and adhere to long-term value may gain an advantage in this round of industry reshuffle. Author: Jingsong Source: Hong Kong Stock Research Society ### Related Stocks - [08083.HK](https://longbridge.com/en/quote/08083.HK.md)