Chinese online platforms rushing to the Hong Kong Stock Exchange to capitalize on short-form drama dividends—can AI solve the loss problem?

Interface News Reporter | She Xiaocheng
Interface News Editor | Wen Shuqing

After benefiting from the short drama boom, Zhongwen Online has decided to add more ammunition.

Recently, Zhongwen Online submitted its H-share listing application to the Hong Kong Stock Exchange. In this prospectus, the company’s recent business evolution and future plans have been further disclosed.

Zhongwen Online, which has been established for over 20 years, listed on the Shenzhen Stock Exchange’s Growth Enterprise Market in 2015, becoming the first “digital publishing stock” in China. With the recent “short drama expansion” over the past two years, Zhongwen Online has attracted external attention.

Launched in 2022, ReelShort became a huge hit overseas, and the parent company behind this platform is Zhongwen Online. In fact, Zhongwen Online has been quite adept at exploring emerging trends—after its listing on the Shenzhen Stock Exchange, the company’s business expanded from novels and games to short dramas, during which it even proposed a “metaverse” strategy in its annual report.

In this listing application, short dramas have naturally become a key potential business emphasized by Zhongwen Online. Since entering the short drama space in 2021, Zhongwen Online has primarily targeted overseas markets. The prospectus indicates that the overseas short drama platform FlareFlow, which the company plans to launch in 2025, has already topped the US free entertainment app charts, with registered users exceeding 33 million and offering around 5,200 short drama episodes by the end of 2025. In the first three quarters of 2025, Zhongwen Online’s overseas revenue grew by 92.8% year-on-year, accounting for 40% of total revenue.

Image Source: Zhongwen Online Official Data

In the short drama wave, Zhongwen Online can be said to have successfully achieved a “transformation.”

According to the prospectus, in the first three quarters of 2025, the company achieved operating revenue of 1.011 billion yuan, a year-on-year increase of 25.12%. On one hand, traditional online literature remains a stable business for the company. In this model, the company’s owned IP rights are adapted into various forms such as short dramas, AI comic dramas, animations, and movies to generate commercial revenue. According to Frost & Sullivan data, based on 2024 revenue, Zhongwen Online ranks third among copyright-driven content platforms in China’s online literature market.

On the other hand, the revenue from short dramas and IP derivatives has rapidly developed, now accounting for a share of total revenue comparable to that of traditional online literature. In the first three quarters of 2025, revenue from short dramas and IP derivatives reached 474 million yuan, a year-on-year increase of 62.9%, with its proportion of total revenue rising from 34.4% in the same period last year to 46.9%. Perhaps benefiting from the vast market size and confidence in the short drama industry, Zhongwen Online’s market value soared to over 30 billion yuan in the past two years.

However, beneath the revenue growth, Zhongwen Online’s financial situation has also exposed profit risks typical of short drama companies.

In the first three quarters of 2025, the company’s losses reached 517 million yuan, compared to 187 million yuan in the same period of 2024. During this same period, Zhongwen Online’s sales and marketing expenses soared to 660 million yuan, an increase of over 90% year-on-year.

It is worth noting that in 2024, Zhongwen Online’s total gross profit and gross margin both showed a declining trend. Zhongwen Online explained that this was mainly due to fierce competition from domestic platforms supported by internet giants, leading to high distribution costs, which resulted in an increase in low-margin domestic To C (consumer) online literature business (online reading through mini-programs). By 2025, improvements in the profitability of overseas online literature enhanced the gross margin of this segment. However, from a business perspective, in the first three quarters of 2025, the gross margin of Zhongwen Online’s short drama and IP derivatives business also decreased by more than 10% compared to the same period in 2024.

The squeeze on profit margins is closely related to Zhongwen Online’s position in the industry chain. As a content provider, Zhongwen Online needs to pay high promotional costs to traffic platforms, a model similar to the “user acquisition” strategy in gaming; overseas, Zhongwen Online has shifted roles to launch an independent short drama platform, but the initial customer acquisition costs and marketing expenses remain high. The company stated in this prospectus that the initial investment for the overseas short drama platform FlareFlow has exacerbated the increase in sales costs.

In addition to “going global,” another keyword in the short drama industry, “AI,” has also been frequently mentioned by Zhongwen Online.

The prospectus shows that Zhongwen Online’s self-developed “Xiaoyao” AI platform has multilingual creative generation, translation, and analysis capabilities, serving over 50,000 creators in more than 90 countries and regions around the world. However, this tool mainly provides users with auxiliary writing solutions, and its competitive edge in the market still needs to be validated. Zhongwen Online stated that it will increase investment in AI technology in the future. Previously, the company’s R&D investment in the first three quarters of 2025 was only 53 million yuan, accounting for just 5% of its revenue.

Through the development of short drama business, Zhongwen Online, as an established content provider, has found its second growth curve. However, at this stage, the short drama industry itself is also beginning to face a series of challenges such as AI impacts and payment rates. “Overseas” and “AI” are both potential opportunities and variables; for Zhongwen Online, finding a sustainable business model remains a pressing issue.