RedNote’s AI Strategy: A Human-Centered Playbook
China's leading e-commerce, social media, content and community-building platform
Today, I’m excited to introduce my collaborator on this piece,
, founder of ApertureChina and Following the Yuan. Yaling and I attended J-School together many years ago and were in the same “Business of Journalism” class. So, how fitting that the two of us, each after a career in traditional media, have now ventured out and built our own businesses, leveraging the skills we honed in journalism. (If anything, she inspired me!)Following years of covering the fashion and consumer sectors for leading publications, Yaling founded the consultancy ApertureChina, which helps global brands with their market research and PR strategies in China. Following the Yuan needs no introduction. It is a leading China Consumer newsletter on Substack.
We each bring our expertise and interests to this coverage, and will demystify RED 小红书 for you to understand its history, relevance, and future AI strategy.
There have been rumors that RedNote 小红书 is revisiting the idea of an IPO, but this time for real. After two failed attempts to go public in the US in July 2021 and then a pivot to HK in December, and a challenging few years for the whole Chinese internet industry. Four years later, RedNote is said to be courting investors in Hong Kong amid the hottest IPO market in the city since 2021.
So first, why is RedNote relevant? In many ways, it’s become a weathervane for consumption trends and confidence across China’s top-tier cities. RedNote’s rise is the classic case of having the right idea at the right time—and with the right people.
Origins and Early Growth
Co-founders Mao Wenchao and Qu Fang, both from Wuhan, founded RedNote in 2013. Mao had just completed his Stanford MBA, while Qu was at Bertelsmann in Shanghai. During China’s early consumer upgrade, they saw a shared challenge for global Chinese shoppers: no one knew what to buy on overseas e-commerce sites or when traveling.
During the early wave of China’s consumption upgrade, they identified a common pain point among global Chinese consumers, including themselves: many people didn’t know what was worth buying on overseas e-commerce platforms or when they traveled abroad. Their solution was creating seven PDF shopping guides targeting popular destinations like Japan, Korea, Thailand, Hong Kong, Singapore, the USA, and France, geared mostly toward women and titled “Little Red Book.”
Thus originally, the app focused on building communities, spaces for people to meet others who were in the same physical cities or interested in the same topics. As it grew, it evolved.
What began as a niche need soon gained momentum, especially after 2015, when they introduced algorithms to their recommendation features. The hyper-accurate tagging is known to be ‘molecular’; it boosts users’ stickiness as well as efficiency in businesses, communities, and consumers finding each other.
Today, RedNote has evolved into a lifestyle guru and search engine for over 300 million users, with a gender split of 3:7 of male and female. And over 50% of users reside in first-tier and second-tier cities.
RedNote in the Global Spotlight
Many of you may have first heard of RedNote during the #TikTokRefugee wave, when American social media users, bracing for a potential TikTok ban, flocked to the app earlier this year. That migration helped it become the No. 1 app not just in the U.S., but in 80 markets worldwide.
It has often been regarded as a localized adaptation of Instagram in China. Its Chinese name, Xiaohongshu, technically translates to "Little Red Book" in English, but is usually referred to as “RedNote”. The app is more than Instagram, and we’ll explain why below.
Today, RedNote is a global platform that caters to a diverse audience, comprising China-based users, overseas Chinese speakers, and English-speaking audiences.
Business-oriented communities and brands see it as a highly valuable channel to efficiently lure in customers with relatively high spending power. This has been largely tested during Covid as RedNote-native businesses were born ahead of certain lifestyle trends, and saw exponential growth. One standout example is outdoor experience brand Dare Glamping, which sourced 60% of orders from the platform in 2021 and secured an angel round of RMB 10 million in the same year— a time when financing in the consumer sector dried up. Of course, whether startups can sustain that momentum by using RedNote’s taste-maker, trend-amplifying capability is another story.
But despite the hype, RedNote hasn’t had much luck in e-commerce for a long time. It launched its e-commerce store “Welfare Community (福利社)” within the platform as early as 2014, but in 2017, a new import tax policy cast a shadow over cross-border e-commerce, and the platform took a major hit. Perhaps partially inspired by the RedNote-native businesses’ success during COVID, RedNote launched an outdoor e-commerce platform, "Little Oasis （小绿洲)” in early 2022. RedNote closed both of these unprofitable, asset-heavy e-commerce stores in late 2023, yielding space for third-party sellers instead.
It is said that recently, it widely known in the e-commerce industry and among consumers that RedNote is no place to shop. Consumers Yaling has spoke to complain about poor customer service, and what they often do is sift through product reviews on it before heading to their familiar e-commerce platforms to shop.
The B2K2C Business Model
Anyway, going back to the original business model. RedNote was created to provide tips and shopping guidance for Chinese consumers traveling abroad or who want to purchase foreign luxury brands. But it has made a few slight pivots and now evolved into this ubiquitous app. Its uniqueness lies in combining social media, content, and e-commerce.
According to a leading Chinese tech news publication, as of early 2022, RedNote reported over 200 million MAUs, with over 43 million content creators, and amongst them, 72% were born after 1990. More than 50% live in what are called first-tier and second-tier cities (basically, think of the crazy cosmopolises with a population of around 20 million, such as Beijing, Shanghai, Shenzhen, Chongqing, Chengdu, and so on).
So what does B2K2C mean? It’s an abbreviation for “Business to Key Opinion Consumer to Customer,” so businesses often sponsor and pay creators that then sell to consumers, in some ways, similar to how KOLs operate on Instagram now, but it’s more institutionalized. RedNote offers tools and functions for creators to directly list themselves as taking sponsors, and brands can directly reach out to creators, and the platform even pushes out notifications to creators and small-scale competitions to incentivize creators to take on sponsorship and help the two parties matchmake.
In fact, RedNote has multiple revenue streams:
Advertising is its main revenue driver, making up 80%-90% of its revenue, based on industry estimates. The platform helps push out advertisements, search ads, as mentioned, brand and content creator matching to maximize brand exposure to users. It uses CPM/ CPC to charge brand fees.
E-commerce is another relatively large revenue stream as the platform charges commission, technical support, logistics service, and other value-added services charges. Eventhough it’s not been doing amazing, it’s still a major revenue driver.
Consumer data service: The platform also offers low-key reports and trend analyses to brands to better help them understand consumer behavior and trends.
Now, with this kind of business model, there come certain risks and issues. First is the KOL business that some content creators are doing what is called “grass-planting” 种草, but the recommendations are sometimes no longer genuine, rather driven by commercial gains. Then there is the issue with RedNote heavily relying on brand sponsorship and marketing, and thus again making users question the authenticity of some of the content, and lastly, the purchase-conversion rate is still relatively low, given that people do not go on the application with a clear intent to shop unlike blatant ecommerce platforms such as Alibaba’s Taobao.
However, despite these business model challenges, RedNote is charging ahead and quickly integrating AI into its strategic long-term business model.
Similar to what Grace has written about ByteDance’s TikTok, there has long been a legacy of using machine learning to better recommend quality content to users, creating a positive process of “better content → more exposure → more traffic → more creators.”
RedNote’s AI Strategy
Now, after understanding who RedNote is, what it is about, we zoom in on its AI strategy. In 2024, the company poached Dai Lidan, a former capital at a leading VC firm in China, and appointed her the Chief Strategy Officer to oversee the company’s strategic (cough* AI) developments. A Peking University computer science major who was a product manager by training, obtained her MBA at Harvard Business School, and then made a pivot into investment and was made a partner at Today Capital in 2022. Her experiences make sense to have led her to this role to oversee strategic M&A and new product innovation.
So this is relevant because she is said to be reporting directly to CFO Zhang Ziqi, who is known to have led investments for RedNote into LLM companies such as MiniMax and (attempted investments) into Moonshot. RedNote is seemingly taking a more active role as an investor in the space than actually integrating AI into its core functionalities.
As mentioned, RedNote had been an active investor in the AI space, but little do people know they actually also have a research lab called “hi lab” (Humane Intelligence Lab) that is focused on ensuring models are better trained on image and text on the platform.
In fact, it’s focus has been outlined as three priorities: 1) implement multimodal technology in internal scenarios and leverage its vast database of image and videos; 2) help creators reduce cost in production and boost efficiency with AIGC tools - which they’ve aggressively rolled out across RedNote; 3) priotize cost control and ensure strategic M&A in the space serves their long-term goals.
As mentioned earlier, RedNote started off as a community-building tool, not an intentional platform, but on July 8, it changed its tagline from “your lifestyle guide (你的生活指南)” to “your life interest community (你的生活兴趣社区).” It has broadened its ambitions and reach through this. To us, it shows how they strive to return to their core value and have stopped wasting energy on things they aren’t good at. They have come to terms with the fact that they do not have to copy other tech or e-commerce companies in the latest e-commerce or AI push; instead, bringing together people and communities has been their true strength, something no one else can compete with.
From that angle, it’s clear why RedNote has not gone all in on AI like some of its peers. As a pre-IPO company that only turned a profit in 2023, they cannot afford to follow suit with big techs because every investment needs to focus on things that show potential for future investors. In addition, they do not have the know-how at the top level to make the next viral AI product, so the AI products and initiatives we see are enhancing their existing community-driven purpose.
The collaboration with Fudan University’s philosophy department is such a classic RedNote move. It demonstrates their ambition to prioritize humanity and shape AI ethics; it’s their answer to the discourse of AI replacing humans, which we’d call staying true to their original goals and playing to their strengths.
Humanities-First Approach
Compared to other e-commerce behemoths (although RedNote isn't really that comparable to them yet) like Alibaba or even ByteDance, RedNote has been relatively conservative and low-key in its large language model push.
Since the inception of “hi lab” it has been heavily recruiting researchers and academics in the humanities fields to collaborate with AI algorithm engineers in post-training AI models. The ultimate goal is to enhance the AI capabilities of humanity through its social sciences literacy and behavioral consistency, according to an exclusive interview by leading Chinese financial news outlet Yicai.
AIGC Tools
The thing is, AI-generated content in many ways disrupts RedNote’s core offering - content, so they have to do it carefully. They’ve introduced a series of smaller functions that enhance content creation but do not replace human creation.
Davinci was launched in late 2023, which was an AI chatbot built based on MiniMax’s foundation model. But the chatbot did not perform very well, for the purposes the company hoped it would, such as providing food recommendations, life tips, or being able to answer questions on topics like geography and such. Thus, this feature has not really received much notice beyond content creators within the RedNote ecosystem.
Trik was then launched, offering a Chinese-style painting tool that was launched by their team. It can also help content creators generate cover images and doodle-to-image features.
Diandian (点点) was then released in early 2025. RedNote launched a chatbot agent on the platform that, if you “@” diandian, it will then reply to your queries similar to how Grok’s chatbot works on the platform.
Keeping it Human-first
Taking a step back, we have to acknowledge that, end of the day, RedNote is nowhere close to the size or influence of one of the BATs yet. However, it is carving out its unique playbook, adopting AI and paving the way for what social+commerce+AIGC may look like in the future.
On the occasion of RedNote’s 10-year anniversary in 2023, co-founder Mao outlined the three principles that guide the company’s future: “Development first, human-centered, small is big (发展第一、以人为本、小即是大).” He pointed out that the origin of Chinese business lies in the mom-and-pop shop, and every great brand starts with a single good product. Reiterating that they’re not here to be the “biggest and fastest”, rather, humans are at the core of the RedNote experience.
Yaling says she loves that perspective because that is what she largely advocates for: understanding China through its consumers. The human-centered approach is so…not China. Look at Chinese tech and e-commerce companies that are deemed successful, such as PDD, Shein, and JD.com. In terms of business model or work culture, they foster a dog-eat-dog mentality, which partially shapes societal attitudes.
We are also pleased to see RedNote flourish, as it reminds us that the humanities have a place in the business world. It’s also a personal reminder to stay true to the core values we bring as humans.
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