At the end of last month, Kunlun Tech released its 2024 financial report, introducing two new revenue segments: "AI Software Technologies" and "Short Drama Platforms.” The latter proved particularly noteworthy, generating over RMB 167 million (approx. $23 million), accounting for 2.96% of total revenue.
Among these, DramaWave, launched in the second half of 2024, received prominent attention. According to the report, by the end of March this year, the app had achieved an annualized revenue run rate (ARR) of approximately $120 million and surpassed 10 million monthly active users (MAUs), placing it among the top five players in the sector.
Launched in September 2023, DramaWave entered a market already dominated by early movers such as ReelShort, ShortMax, and DramaBox, all of which had established clear competitive advantages. That Kunlun Tech managed to carve out a foothold in just six months is a testament to its execution capabilities.
As DramaWave gained traction, Kunlun Tech's short drama ambitions began to draw broader industry attention. In reality, the company's strategy in this space runs deeper and wider than it might initially appear.
01.Two Products in Six Months: A Diversified Entry Strategy
Within just half a year, Kunlun Tech rolled out two short drama apps for global markets. In addition to DramaWave, it launched a second app, FreeReels, in December.
Releasing two products in such a short span in an already saturated market could risk internal cannibalization and resource dilution. Yet, Kunlun Tech managed to avoid both. The two apps were designed with clearly differentiated monetization models and target audiences.
DramaWave is the revenue workhorse, combining ad monetization with subscriptions and in-app purchases (IAPs) as core income streams. In contrast, FreeReels takes a freemium approach, focusing on broader market penetration with a completely free user experience.
Geographically, DramaWave targets mature Western markets. According to AppGrowing, its top five ad destinations are the United States, Canada, the UK, Germany, and France.
Meanwhile, FreeReels leans heavily into Southeast Asia. Although the U.S. tops its media buy distribution at over 21%, Indonesia comes in a close second with over 20%, and the Philippines also ranks in the top four.
This geographical divergence is reflected in their ad creatives as well. DramaWave primarily runs trailers and scene clips featuring Western actors, whereas FreeReels uses creatives with predominantly Asian faces.
The result is a complementary, rather than competitive, dynamic between the two platforms. Together, they employ a "premium + free" dual strategy aimed at capturing diverse audiences across income levels and regions.
Unsurprisingly, DramaWave has seen stronger market performance—thanks not only to a more robust monetization model but also to Kunlun Tech's heavy investment in user acquisition.
According to AppGrowing, although DramaWave launched in September, large-scale advertising only ramped up in early November. Between then and the end of January, it experienced three notable surges in media buying, with daily ad volume rising from around 1,000 creatives to over 10,000.
FreeReels, on the other hand, never reached the same scale. While it began limited ad testing in early December, its volume peaked at fewer than 2,000 daily creatives and then dropped off sharply after late January, eventually going dark in early February.
Coinciding with FreeReels' pullback, DramaWave entered a new phase of ad blitz, pushing past 20,000 daily creatives—and even hitting 40,000 at its February peak.
This pattern suggests that FreeReels may have fulfilled its short-term mission, or that Kunlun Tech chose to consolidate resources behind its stronger performer. Notably, FreeReels has even started redirecting users toward DramaWave.
02.Strengthening the Content Pipeline: Investment Meets AI
Kunlun Tech's involvement in short drama extends well beyond the front-end product layer. On the content side, it is leveraging both capital investment and AI innovation to gain a competitive edge.
In November 2023, its wholly-owned subsidiary Kunlun Group Limited increased its stake in Inkeverse (formerly Inke). Initially a livestreaming platform, Inkeverse has successfully pivoted to become a leading short drama producer in China, complete with a dedicated global team.
This investment aligns with Kunlun Tech's global short drama ambitions. Yet what's even more eye-catching is the company's parallel push into AI-generated content.
In August 2023, Kunlun Tech launched SkyReels, the world's first AI short drama platform integrating large-scale video and 3D models. The system promises end-to-end automation—from script generation to character design, scene synthesis, and video production.
This is powered by a suite of proprietary AI models:
SkyScript for script generation,
StoryboardGen for automated storyboarding,
and Sky3DGen for creating 3D scenes and assets.
At launch, Kunlun declared the arrival of the “one user, one drama” era. If widely adopted, this AI-driven production model could significantly lower content creation barriers and democratize participation in the short drama economy—even for indie teams or solo creators.
In short, Kunlun Tech doesn't just want to mine for gold in the short drama boom—it wants to sell the picks and shovels too.
In early 2025, the company open-sourced SkyReels-V1, China's first video generation model for AI short dramas, along with the first SOTA-level emotion-and-motion control algorithm. This move adds more fuel to an already heated content creation race.
03.AI at the Core: Kunlun Tech’s Cross-Sector Ambitions
Kunlun Tech was among the earliest Chinese tech companies to embrace the AI wave, announcing an "All in AGI and AIGC" strategy. Its AI ambitions span far beyond short dramas, covering search, music, social, and gaming applications.
In August 2023, it launched Tiangong AI Search, which has since evolved through multiple iterations into a multifunctional AI assistant. According to the financial report, its peak monthly active users exceeded 10 million during the reporting period.
In music, Kunlun leveraged its Mureka foundation model to launch an AI music creation platform also called Mureka, targeting global commercial users. The platform allows creators to compose, list, and sell tracks directly—earning revenue while Kunlun takes a commission. As of March 2025, the platform's ARR stood at around $12 million.
In social, the company capitalized on the recent AI companion trend by launching Linky, an app that allows users to design and interact with virtual characters. By the end of the reporting period, Linky's peak monthly revenue had surpassed $1 million, with MAUs reaching 3 million.
Gaming, once Kunlun's core revenue driver, is still part of the plan—especially as AI opens new gameplay possibilities. Although no AI-native titles have launched yet, the company is working on 猫森学园, a game currently in testing. Described as a highly customizable experience, it promises to blend AIGC with user-generated content (UGC), giving players tools to co-create in-game content.
04.Betting Big on AI—Even at a Loss
Kunlun Tech posted a net loss of RMB 1.59 billion (approx. $220 million) in 2024. The company attributes this largely to increased R&D spending aimed at maintaining its lead in AI technologies. Total R&D costs rose by 59.5% year-on-year to RMB 1.54 billion.
Industry projections suggest that 2025–2026 will be a period of AI monetization, with profitability expected in 2027. Kunlun aligns with this timeline and expects its AI business to turn a profit by that year.
In other words, the company is likely to operate at a loss for the next two years—but it remains resolute. As it stated in the report, AI represents a once-in-a-generation opportunity, and Kunlun is willing to endure short-term losses in pursuit of long-term leadership.
