Once again, Chinese corporations have made announcements regarding their ventures into the realm of artificial intelligence, this time focusing on its practical applications. In a recent development, the search engine titan, Baidu, introduced a platform designed for the creation of advertising campaigns, bearing resemblance to Google’s AI-driven advertising solutions.
This launch was accompanied by the introduction of various other AI tools earlier this month. As reported by early corporate testers of Baidu’s AI advertising platform, named QingGe, conversion rates witnessed a remarkable 20% increase, all achieved in a significantly shorter time frame compared to the typical duration required by advertising agencies.
Nomura analysts, following discussions with industry experts and companies in Beijing shortly before September 10th, highlighted that the early adopters in the large language model market have already initiated the commercialization process. Furthermore, the approval for opening up more than 10 LLMs to the public has eliminated additional hurdles to monetization, as noted in their September 10th.
Tencent’s AI Integration and China’s Consumer Market
During the same period, Tencent made an announcement regarding the integration of its AI model into the creation of advertising content and its own video conferencing application, which resembles Zoom.
Concurrently, the company initiated the waiting list for a chatbot similar to ChatGPT, to be integrated into its popular social messaging app, WeChat, known locally as Weixin, boasting over a billion users.
China, distinct advantage lies in its vast user base, coupled with the capacity to expand internet access, thereby bolstering the online ecosystem, encompassing everything from Taobao e-commerce transactions to the management of scan-to-bike services.
The Chinese consumer market remains highly receptive to new offerings, as evidenced by the recent collaboration between Luckin Coffee and the prominent Chinese alcohol company, Kweichow Moutai, resulting in the successful sale of more than 5.4 million cups of spiked lattes on the very first day.
This surge in popularity underscores the fact that Chinese consumers are quite open to embracing novel products. Joey Wat, CEO of Yum China, the parent company of KFC, expressed the company’s exploration of how generative AI can be leveraged to enhance their business prospects during a recent conversation.
Nevertheless, she pointed out that the technology must gain a deeper understanding of internal operations before it can genuinely offer significant assistance. Furthermore, the true extent of China’s AI capabilities remains unclear at present, as it appears to be primarily showcased through demonstrations and specific business partnerships.
Insights from Tony Zhang and Industry Developments
Tony Zhang from CLSA highlighted in a recent phone interview that, “In general, we observe that Chinese language models are still not on par with the most advanced version of ChatGPT, version 4.”, he also noted that China’s Large Language Models (LLM) are evolving rapidly.
Zhang highlighted that certain emerging AI tools in China, such as integration into word processing, commercial advertising, or consulting, may represent the initial areas of genuine commercial utility.
He added, “There are specific types of applications that are accessible to the general user and some enterprise users, and I believe this progression is imperative for a model to enhance its monetization model and explore further opportunities.”
In general, the more generative AI is employed, the more it is expected to improve. With the approval from Beijing, AI applications designed for public use, like Baidu’s Ernie bot, can now be widely adopted in China.
Alibaba, also announced the significant language model, Tongyi Qianwen, to the public and disclosed collaborations with companies such as Taobao and smartphone manufacturer Oppo to create various applications.
Testing alone has the potential to generate revenue, and revenue stemming from generative AI and large language models accounted for 20% of SenseTime’s earnings in the first half of 2023, as noted by Nomura analysts who referenced discussions with the company’s management.
While Nomura hasn’t provided ratings for SenseTime or most other companies, the investment firm has assigned a neutral rating to Baidu and a buy rating to Tencent, according to analysts who conducted visits earlier this month.
To gain an understanding of the significant impact that large-scale applications can have on business efficiency and outreach, it’s valuable to examine ByteDance, a prominent player in the AI and consumer-focused applications domain, known for owning TikTok and its equally popular Chinese counterpart, Douyin.
Brand Effectiveness and Consumer Engagement in China
According to David Xie from Oliver Wyman, who is collaborating on an upcoming report with Douyin, these apps offer brands the ability to swiftly evaluate their effectiveness with consumers.
Their research discovered that a clothing brand, for instance, could leverage its presence on the app to accelerate consumer purchases significantly, reducing the time it takes to make a sale by approximately two weeks compared to Alibaba’s Tmall.
Xie explained, “In the past, without a content platform like this, you were limited to conducting surveys with only 2,000 samples.” This underscores the significance of platforms like Douyin in reaching and influencing a vast audience of hundreds of millions of Chinese internet users who may not have easy access to tools like ChatGPT or Google.
AI in China is changing quickly with Baidu’s advertising platform, Tencent’s chatbot, and Alibaba Cloud’s model. AI is making more money, like 20% of SenseTime’s earnings. People in China like new stuff, and AI helps brands. David Xie found out that AI on Douyin helps brands sell things faster.