‘Smart’ social media app Soul files for an IPO in the U.S.

Soul, an up-and-coming Chinese social media platform, filed for a listing on Nasdaq on Monday with the stock symbol SSR. The initial public offering will likely take place this year, according to Bloomberg.

The fundraising target was not specified, but earlier reports stated that the company could raise close to $300 million. The company is currently valued around $1 billion. Tencent, the owner of WeChat, is currently a “principal shareholder” with 49.9% of the company’s shares.

Founded in 2016 and created by a Shanghai development team, the app bills itself as an “algorithm-driven online social playground.” The platform matches like-minded users called “Soulers” through an elaborate personality and preferences test. The test is then fed through an AI-based recommendation system that lists high percentage matches.

Users can interact with their matches on a page called “Planet,” either through chat, audio call, or “Soul Cam,” the app’s video function. The platform is currently available in China, and in North America, Japan and Korea, with a Chinese version also available across Southeast Asia.

Soul makes money primarily from selling virtual items and membership subscriptions. According to the prospectus, it had a smashing success during the pandemic year, raking in $77 million in revenue, up 604% from the year prior. It made $36.4 million in the first quarter of 2021, a 260% increase from the same period last year. Soul claims it now has over 100 million monthly active users.

Much of Soul’s cash reserves have been spent on advertising and its proprietary friend recommendation system. Last year, it spent $95 million on marketing (roughly 120% of revenues) and $28 million on technology (30% of revenues).

Though the app has a tiny user base — only 6 million active daily users at the end of 2020 — it seeks to distinguish itself by offering a “tight-knit” community in comparison to larger platforms.

According to a research report (in Chinese) in March, Soul users spent an average of about 40 minutes per day on the app, which is longer than most apps in its category.

In 2018, approximately 38% of China’s 20-34 year-olds lived alone (in Chinese). Soul is hoping to capitalize on an increasingly lonely demographic by providing Chinese Millennials and Gen Z’s the chance to encounter new people online.

“Most social networks fail to move away from the traditional model centered on pre-existing social circles,” said the app-makers in a press release. “From its early days, [Soul App] has aimed to serve as a social platform where people connect with each other in a simple, genuine way.”

Yet, as with many apps that provide encounters with strangers, Soul faces a credibility gap. One way it has sought to address this is to move away from a dating association: Unlike its dating app competitors, Momo and Tantan, Soul deliberately downplays the role of photos in user interactions. Matches are strictly based on personality or “soul,” so users can interact without ever revealing their face.

So far, the approach seems to be working: “I think the content posted on [the app] are relatively refreshing, and the people on it are rarely sketchy,” said one user on Zhihu (in Chinese). “There’s interesting people on it, and they’re all usually willing to be friends.”