Perfect Diary burned cash on marketing to become China's top beauty brand — then crashed

Perfect Diary, launched in 2017 by Yatsen Holdings, became China's fastest-growing domestic beauty brand by spending aggressively on social media marketing, KOL (key opinion leader) partnerships and livestreaming. The brand was everywhere on Xiaohongshu (Little Red Book), Douyin and Tmall, and it went public on the NYSE in November 2020 at a valuation of over $12 billion.

But the growth was built on marketing spend that consumed more than 60% of revenue. The brand had little pricing power, no loyalty, and thin margins. When customer acquisition costs rose and competition from other domestic brands intensified, the model broke. Revenue growth stalled while marketing costs stayed high, and the company reported mounting losses.

Yatsen's stock fell more than 90% from its peak. The company attempted to pivot toward skincare and higher-margin brands, acquiring Galénic and Eve Lom, but the core Perfect Diary brand continued to struggle. The case became a cautionary tale about the limits of growth-at-all-costs in consumer beauty, and the difference between buying customers and building a brand.