China Securities Co., Ltd.: Latest Tracking of AI Application Progress
21/12/2024
GMT Eight
In recent years, internet companies such as BAT and ByteDance have actively invested in the AI industry, forming a comprehensive layout from models to platforms, and ultimately to applications and devices. With the commercialization of AI gradually entering the implementation phase, products such as agents, AI glasses, AI headphones, and AI toys have attracted market attention, and the AI industry is expected to further accelerate.
1. The emergence of AI toys is timely
ByteDance's AI toy, "Xianyanbao," is leading a new wave of AI toys. Xianyanbao is a blue and white plush toy with integrated Douyin model technology, showing excellent performance in dialogue interaction and emotional communication, with resale prices on second-hand platforms reaching hundreds of yuan. Xianyanbao is a typical case of the rise of AI toys. A number of AI toy startups have emerged domestically and internationally, with new products like BubblePal achieving sales of over 10,000 units this year.
AI toys have a long payment cycle and high market growth rate, making them one of the best landing scenarios for big models. AI toys can continue to charge users for the use of big models, and the tolerance for illusions in companion scenarios is high, making AI toys one of the best landing scenarios for big models currently. We expect AI toys to meet the needs of users for traditional children's toys, grain products, smart speakers, and AI virtual companion applications.
1. ByteDance's AI toy "Xianyanbao": A new form of Douyin model landing
ByteDance's AI toy "Xianyanbao" has stood out with its unique appearance and AI capabilities. Xianyanbao is an emotional companion doll developed internally by ByteDance. It is a blue and white, small mountain-shaped plush toy that integrates several artificial intelligence technologies from the Volcano engine, including the Douyin model, button professional version, voice recognition, and synthesis. Since the product is not sold to the public and the production quantity is limited, resale prices on second-hand platforms have reached up to 500 yuan.
Xianyanbao has AI dialogue interaction functionality and excellent emotional communication. According to evaluations from various media outlets, Xianyanbao can engage in Chinese and English dialogue interactions with users, such as storytelling and reciting ancient poems. When users share their troubles with Xianyanbao, it provides targeted advice, showing good emotional communication and companion effects. It also has memory capabilities and can accurately answer the content of the previous two rounds of dialogues. However, it performs weakly in mathematical logic and cannot compare the numbers 9.9 and 9.11 in size. Xianyanbao embeds an AI brain, integrating the capabilities of the Douyin model. This AI brain is called Magicbox, a universal AI hardware developed by a third-party company, Folotoy, which integrates AI conversation chips, microphones, and speakers. With a small size, it can be placed inside various dolls to provide them with AI dialogue and companion functions.
2. The rising trend of AI toys with frequent mini hits recently
AI toys with a long payment cycle and high market growth rate are one of the best landing scenarios for big models at present. AI toys provide users with language and motion interaction experiences, enhancing the companion function of toys. From a technological perspective, there are still some illusion problems with big models, but the fault tolerance rate in the AI toy scenario is high, matching the current technological status of big models. From a business model perspective, AI toys are not a one-time deal; they can usually adopt a hardware one-time fee + software subscription fee business model. With a longer user lifecycle and higher average customer spending, AI toys can provide a stable cash flow for related companies. In terms of market size, the toy market has entered a mature stage, with NPD data showing a global scale of $108.7 billion in 2023, and growth rates in the past five years have been below 10%. However, as a new emerging field, the AI companion market has larger market space and higher growth rates. According to Ark Invest, the global AI companion market is expected to reach $150 billion in 2030, with a compound annual growth rate exceeding 200% from 2024 to 2030.Large model capabilities allow for storytelling, answering questions, word association games, and the ability to embody different intellectual property (IP) characters, providing a more personalized voice interaction experience. Although BubblePal's voice interaction function is similar to Tmall Genie and Xiao Ai speakers, it offers a better accompanied experience, expressing understanding of children's emotions in language interactions, and communicating in language that is easy for children to understand. In addition, companies such as Qidian Lingzhi, Yijia Yiban, Beipei Technology, and San'er Cat Technology are all researching AI toys, and are expected to release a batch of new products next year.Overseas: Some products have received good feedback from users, and are sold out immediately after they are launched.
Among the top companies, Tesla recently launched a mini version (1:10 scale replica) of the Optimus Gen2 humanoid Siasun Robot&Automation, priced at $40. It sold out within 24 hours of going online, and is currently being sold on second-hand platforms like eBay for as high as $1300. Casio, in partnership with the startup Vanguard Industries, launched the AI pet Moflin in November this year, priced at nearly 3,000 RMB. It also sold out during the pre-sale period. This product has a fluffy appearance, provides emotional feedback, and gradually develops a strong emotional connection with the user. Among startup companies, the Japanese company GROOVEX developed the home companion Siasun Robot&AutomationLOVOT, which was first launched in 2018. It is equipped with high-precision devices such as light sensors, a 360-degree hemispherical camera, and a liquid crystal display screen resembling eyes. Each Siasun Robot&Automation has a unique personality, providing users with a nurturing gameplay. The price of this product is as high as 59,800 RMB, and by the end of 2023, sales in Japan had exceeded 10,000, and it officially entered the Chinese market in June 2023, with retail stores opened in Shanghai. Silicon Valley startup Curio has also developed an AI plush toy called Grok, which integrates GPT series models to provide users with language interaction and emotional companionship. The specifications of the doll are similar to the Byte package, including a doll toy set, a built-in speaker, microphone, and Wi-Fi hardware device, priced at $99.
Risk Warning:
Risks include inadequate copyright protection measures, unclear division of intellectual property risks, a decrease in IP influence, risks of disruption in cooperation with IP or celebrities, risks of changes in public aesthetic preferences, increasing competition risks, low willingness of users to pay, risks of difficulty in changing consumer habits, risks of corporate governance of related companies, risks of underperformance in online content, risks of slower-than-expected development of generative AI technology, risks of high difficulty in product research and development, risks of product launch delays, risks of rising marketing acquisition costs, risks of talent loss, risks of rising labor costs, risks of policy regulation, risks of commercialization capabilities falling short of expectations.
II. ByteDance AI Layout Overview
ByteDance launched Today's Headlines in 2012, TikTok in 2017, and has become one of the fastest rising leaders in the mobile Internet era with its keen perception of C-end users, rapid product iterations, and operational capabilities. Entering 2024, ByteDance is actively deploying AI applications with the goal of replicating its success in the AI era as it did in the mobile Internet era. We have discovered from public information that ByteDance is focusing on three aspects of its layout around its unique C-end advantages: underlying models, software application matrix, and intelligent hardware.
ByteDance established the Flow department to oversee its AI business. According to LatePost and Z Finance, the Flow department is on par with major business departments such as TikTok, Feishu, and Huoshan. The Flow department consists of three teams: the model development team Seed, the AI product team Flow, and the R&D support team Stone. In order to accelerate AI application development, ByteDance is internally forming several small AI product teams, each consisting of 10-15 people. ByteDance has become one of the most extensively deployed AI companies in China, with products in large models, applications, and hardware all being implemented. On the model side, the company has covered a matrix of models including text, audio, video, 3D, and other modalities, with model capabilities ranking among the top in China. On the application side, the company has launched over 20 AI products covering video creation, virtual companionship, image generation, and almost all popular sub-sectors, with nearly half being international products, and over 5 products ranking in the top 10 of AI product charts. On the hardware side, the company has released the AI smart earphones Ola Friend, and we expect more AI devices to be released in the future. Models: Developed 11 models in-house, accelerating iteration of multi-modal technology. At the Spring Huoshan Engine FORCE Conference in May 2024, ByteDance officially launched the self-developed large model "Dou Bao Large Model". This large model matrix includes a total of 9 models, including Dou Bao General Model, speech synthesis model, text living picture model, etc., covering text, speech, and image generation, among other modalities, and has been applied in over 50 different business scenarios within ByteDance. In September 2024, ByteDance further expanded the Dou Bao Large Model matrix by releasing new video, music, and simultaneous translation models. The Dou Bao series models already cover almost all modalities such as text, image, music, and video; in terms of implementation, the Dou Bao models are open to both ByteDance's AI applications and third-party applications, with a rapid increase in call volume recently. According to the Huoshan Engine official account, as of September 2024, the daily average token call volume of Dou Bao Large Model has exceeded 1.3 trillion, doubling compared to July; in terms of multi-modality, the Dou Bao living picture model generates over 50 million images daily, and the speech model processes 850,000 hours of speech daily. The Dou Bao video model ranks among the top in the global video model, with impressive dynamic performance. The Dou Bao video model was released in September this year, providing cinematic-level visual effects, smooth transition between shots, good camera control capabilities, and is currently open for use or testing in C-end applications such as AIMe or Dou Bao. Key highlights of the model include: a) Characters can perform continuous actions. For example, completing a continuous action sequence like "removing sunglasses, standing up, approaching a statue" with natural fluidity and high stability. b) Multiple camera angles can be displayed in the same scene. Using a single image and a prompt, multiple camera shots with consistent style, scene, and characters can be generated, with smooth transitions between different shots. c) Strong camera control capabilities. Existing products mainly control object movement through features like motion brushes. Dou Bao can achieve capabilities such as 360-degree rotation around a subject, zooming in/out, target tracking, and adjusting camera elevation, allowing flexible control over perspective. Applications: Over 20 AI applications have been launched, driving ByteDance's "APP Factory" methodology into AI applications. InIn the era of mobile internet, ByteDance has positioned its mobile app matrix around two products with hundreds of millions of DAU, Douyin (TikTok) and Toutiao. According to statistics from LatePost, since 2018, ByteDance has independently developed or acquired a large number of projects, launching around 140 applications on the App Store. In the age of generative AI, ByteDance is exporting the "APP factory" methodology to AI applications, hoping to explore the TikTok and Toutiao of the AI era. According to Z Finance and Qimai Data, ByteDance has launched more than 20 AI applications globally, covering video creation, virtual companionship, image generation, and almost all popular subfields.
1) AI Assistant: ByteDance has launched DouBao and Cici for both domestic and overseas markets, both featuring AI chat Siasun Robot & Automation and a large number of intelligent avatars. DouBao is ByteDance's largest native AI application in terms of user volume, and is the largest AI application in China and the second largest globally. According to AI Product Rankings, DouBao had 59.98 million monthly active users in November, a 17% increase month-on-month, with a compound growth rate of 14% from November to November under a high base; in terms of relative size, DouBao's monthly active users in November were about 5 times that of the second largest AI application in China (Wenxiaoyan App). Cici had 12.67 million monthly active users in November, similar to the monthly active users of Google's Gemini App.
2) AI Video: Zimei (Dreamina in overseas markets) includes a series of AI creation tools and a community for sharing works. Users can use AI video, image, and music tools for creation, and share their works in the Zimei community. According to 36Kr, Zimei is an AI application launched by former Douyin Group CEO Zhang Nan after transitioning to Jianying, and has received traffic from the video editing tool Jianying, with over 100 million monthly active users. In November, Zimei became the first product to integrate DouBao's video model, demonstrating ByteDance's emphasis on the product. We are optimistic about the increase in user stickiness brought about by AI video creation and sharing, which will drive the monetization of advertising and gradually grow into a video community in the AI era. Additionally, the video editing product launched for Douyin, Jianying (CapCut in overseas markets, launched for Tiktok), integrates a series of AI functions such as video generation and image editing to improve content production efficiency for creators.
3) AI Education: Gauth is an application launched by ByteDance at the end of 2020, offering a "take a photo and search for answers" feature. It integrated AI functions as early as May 2023 and continuously added GPT-4 and Bard to improve answer accuracy. In early 2024, it upgraded its AI functions further, with detailed explanations of solution steps and reasons. According to AI Product Rankings, Gauth experienced slight fluctuations in November due to factors such as student holidays, with 8.62 million monthly active users in November, a 47% decrease month-on-month, ranking fifth among overseas applications, but increasing by 69% in October to 16.26 million. DouBao AiXue is an AI education app launched by ByteDance for the domestic market, formerly known as Hippo Ai Study, an AI education app by ByteDance's Hippo Education. In September, it was officially renamed DouBao AiXue, providing functions such as answering questions, correcting homework, knowledge Q&A, essay guidance, and mental arithmetic practice.
4) AI Social: Maoxiang (Anydoor in overseas markets) is an AI virtual companion application. Compared to similar domestic products like Xingye and Maopuya, Maoxiang describes the psychological activities and expressions of virtual objects in the conversation, creating a better chat atmosphere and having a stronger memory capacity. Maoxiang had 4.58 million monthly active users in November, a 23% increase month-on-month.
5) AI Image: ByteDance has launched two categories of AI image products. One is Xinghui (PicPic in overseas markets), mainly providing AI portrait functions similar to Moya camera, with 1.24 million monthly active users in November according to AI Product Rankings. The other is AI photo editing application Xinghui (Hypic in overseas markets), similar to Meitu Xiuxiu. Hardware: AI headphones have been launched first, and AI glasses are in development. ByteDance's first AI intelligent device, the Ola Friend AI headphones, was launched in October 2024 for 1,199 yuan. The product integrates the large model of DouBao and is ByteDance's first AI hardware device. Users can directly activate DouBao for conversation through voice without opening their phones when wearing the headphones, providing a new channel for human-computer interaction. The headphones have strong voice recognition capabilities and are expected to have a wide range of applications in daily information queries, travel, English learning, and more. According to the DouBao official website, Titanium Media, and Sina Finance, the AI features of Ola Friend will continue to be updated after launch, and ByteDance is also developing AI glasses. With the full opening of DouBao's video model, we expect AI hardware to provide a new landing method for DouBao's AI technology.
Risk Warning: Risks include weaker than expected copyright protection, unclear division of intellectual property rights, decline in IP influence, interruption of cooperation with IP or celebrities, changes in public aesthetic preferences, intensified competition, low willingness for users to pay, difficulty in changing consumer habits, governance risks of affiliated companies, underperformance in content launch, lower than expected development of generative AI technology, difficulties in product research and development, delays in product launch, rising marketing costs, talent loss, rising labor costs, policy regulation risks, and lower than expected commercialization capabilities. Third, Overseas AI Applications: Grassroots research and progress in overseas AI applications in San Francisco.Overseas AI applications - why the attention?
The Overseas AI applications have seen a significant increase in attention since November. This is due to the announcement made by the American CRM company Salesforce on November 9th, stating that they will be recruiting 1000 salespeople to promote their AI assistant product Agentforce, and many customers have given positive feedback on the use of Agentforce. Following this, during the earnings season, a group of AI application companies reported better-than-expected third-quarter earnings, including Applovin for AI advertising, Palantir and Snowflake for AI data, Shopify for AI e-commerce, and Salesforce's own earnings exceeding expectations, which validated the feasibility of AI assistants.
Which specific areas have seen changes - focus on To B scenarios, leading in advertising/Agent/data directions
AI advertising: AI has significantly improved the precision of advertising placements, with programmatic advertising company Applovin experiencing revenue growth of over 35% for four consecutive quarters. The AI placement system Axon 2.0 is showing a flywheel effect, and besides gaming, the conversion rates for e-commerce ads are also expected to improve.
AI assistants: AI has the potential to AI-ify all internal management processes and business aspects of a company. For example, Salesforce's customer management assistant Agentforce received 200 orders in its first week, and the pricing of 2 dollars per conversation has been widely accepted. AI is also empowering companies like SAP, ServiceNow, and Workday, improving efficiency in various internal aspects like finance, human resources, and supply chain management.
AI data analysis: AI can assist in better data management, analysis, and visualization whether it's for large multinational corporations' data warehouses or small companies' internal databases. Companies like Palantir, Snowflake, and Elastic have shown positive trends in their third-quarter earnings.
Long-term outlook for AI applications - B-side performance comes first, but long-term C-end elasticity is greater
AI applications on the B-side are easier to show results in the short term, as for companies, adopting AI products is essentially a math problem: if the long-term return on investment from AI is greater than the purchase cost, then the willingness to buy is greater (e.g., Agentforce's 2 dollars per conversation is more cost-effective than the corresponding labor cost).
On the other hand, the core of C-end applications is the significant improvement in the demand side's experience, which is a relatively slow and iterative process, but once it breaks out, the long-term space and elasticity are greater. For C-end applications, we are optimistic about the development in the directions of AI video, companionship & games, and search.
Risk warning: Risks related to copyright protection being lower than expected, unclear division of intellectual property rights, decreased influence of intellectual property rights, interruption in cooperation with intellectual property or celebrities, risk of changing public aesthetic preferences, intensified competition, low willingness of users to pay, difficulty in changing consumption habits, corporate governance risks related to related companies, content performance falling short of expectations, risks of development of generative AI technology falling short of expectations, risks of high difficulty in product research and development, risks of product launch delays, risks of increased marketing acquisition costs, risks of talent turnover, risks of rising labor costs, risks of policy regulation, risks of commercialization capabilities falling short of expectations.
Updates on Overseas AI applications: Insights on Agentforce from Salesforce's third-quarter report
Key Points:
During Salesforce's FY3Q25 earnings call, the management highlighted the remarkable performance of Agentforce, completing 200 orders in just one week. Moreover, in the fourth quarter, the company plans to recruit 1400 sales personnel globally to promote this AI agent product. Agentforce integrates the entire product line of the company, including sales, service, marketing, analysis, data cloud, and Slack, to help clients improve work efficiency, optimize service experience, and reduce personnel costs.
Agentforce is expected to significantly reduce the labor costs of customers. It is promoted as an additional service and paid based on usage, charging 1 dollar per conversation, which the company claims is significantly lower than the human sales cost of 8-10 dollars per conversation.
Key focus on the Agentforce 2.0 launch event on December 17th.
Analysis:
How do US software companies incorporate AI agents into their business?
In their FY2025 third-quarter report, Salesforce's CEO and COO emphasized the future focus on Agentforce. The CEO stated that the company has become the largest supplier of digital labor in the global market. Agentforce was launched on October 24th and reached 200 orders by the end of the month. As of the earnings call day, numerous companies including FedEx, Adecco, Ernst & Young, ACE Hardware, IBM, and Royal Bank of Canada Wealth Management are using Agentforce on the Salesforce platform to build their digital labor teams. The company expects all of its current 135,000 customers to use Agentforce in the future to organize data and improve workflow.
Agentforce is an AI assistant service launched by Salesforce. It integrates various functions such as sales, service, marketing, analysis, data cloud, and Slack on one platform, breaking the isolated status between different businesses and seamlessly connecting data and workflows. It helps clients achieve the following: 1) Improve work efficiency by handling repetitive tasks, allowing employees to focus more on strategic and valuable work; 2) Optimize customer experience by providing help to retail customers when needed and offering solutions tailored to their needs; 3) Reduce costs by reducing reliance on human resources and lowering labor costs for companies.
Specific use cases for Agentforce's effectiveness include:
1) Speed: John Wiley International Publishing Group stated that Agentforce addresses queries and resolves issues promptly.
As Agentforce shows promising growth and applications, it is becoming a key player in advancing AI technologies in the business sector. Sales and usage results will be closely monitored in the upcoming releases and financial reports to assess its impact on the industry.The speed of the topic is more than 40% faster than the previous chat with Siasun Robot & Automation.2) Immediate: As one of the busiest airports in the world, London Heathrow Airport is able to respond instantly, accurately, and simultaneously to inquiries from thousands of passengers through Agentforce.
3) Cross-regional: SharkNinja is a new customer for the third quarter of the 2025 fiscal year. They have chosen Agentforce and Business Cloud to provide round-the-clock personalized support to customers in 28 international markets, and to streamline their service operations.
The company states that Agentforce has shown outstanding performance in terms of usage. There are very few instances where Agentforce shows "illusions" because it is not only based on Salesforce data and metadata from 17 languages and 740,000 documents, but also on each customer's data, such as purchasing, returns, etc. The company's 200-300PB data gives Agentforce a leading edge in the industry, making Agentforce more accurate with the least occurrences of "illusions" compared to other products. Examples of usage case studies from top companies in various industries include:
1) The world's leading job site Indeed has 3 people hired every second on its platform. The job site integrates the company's Data Cloud service into its data architecture, matching 580 million job seeker profiles with over 3 million employers using Agentforce, with the goal of shortening the hiring process by 2030 and helping 3 million people overcome employment barriers.
2) The global leading talent solutions provider Adecco processes 300 million job applications every year, but in the past they were unable to process or respond to the vast majority of applications in a timely manner. Now, Agentforce is able to screen a massive number of resumes at an astonishing scale, matching job seekers with job opportunities around the clock. In addition, Agentforce also assists job seekers in improving their resumes, increasing their chances of getting a job.
3) Smart home security supplier Vivint has long struggled with high turnover rates in telephone customer service. Now, with the help of Agentforce, Vivint is building a digital support team that provides support through their application, website, troubleshooting various issues. In addition, Vivint plans to further automate the scheduling of technicians, payment requests, proactive issue resolution, and device telemetry data usage using Agentforce, as Agentforce covers the entire Salesforce product line including Slack.
Agentforce is promoted as an additional service and is charged based on usage. According to performance meetings, Agentforce has a usage-based fee structure, charging $2 per conversation, and customers have a higher willingness to choose when it is promoted as an additional service of Service Cloud. The $2 per conversation fee standard is more cost-effective compared to the cost of a sales representative's annual salary and KPI achievement. Compared to the cost of human labor being $8-10 per conversation, Agentforce is more cost-effective.
The company is optimistic about the revenue potential of Agentforce and is recruiting global sales representatives. Although in the performance guidance, the company expects that fourth-quarter bookings related to Agentforce will not make significant contributions to cRPO (cumulative revenue from deferred income/orders in the next 12 months), the company states that in order to seize the growing demand for Agentforce, they plan to recruit 1,400 client managers globally in the fourth quarter of the 2025 fiscal year, and use the latest SDR Agent and Sales Coach Agent to assist every salesperson. Agentforce SDR and Sales Coach are services launched by the company in the middle of the year to assist sales with AI automation, with the SDR Agent interacting autonomously with inbound leads (potential customers) in natural language, answering questions, handling objections, and scheduling meetings for human salespeople; while the Sales Coach Agent role-plays with salespeople during exploration, sales, or negotiation calls, simulating the buyer's role.
It is recommended to pay attention to the Agentforce 2.0 launch event on December 17th. Although Agentforce was only launched on October 24th, the company will hold the Agentforce 2.0 launch event in San Francisco on December 17th.
Risk Warning: Risks include slower-than-expected growth in paying customers for AI Agent products, risks of Agentforce 2.0 feature or performance updates falling short of expectations, risks of Focus Technology's AI Agent products' ARPPU not meeting expectations, risks of AI Agent satisfaction levels falling short of expectations, risks of rising acquisition costs from platforms like Google, risks of increased research and development expenses, risks of American companies like OpenAI restricting the use of their services and technology by Chinese companies like Focus Technology, risks of competition from Ali International, risks of lower-than-expected demand from SMB customers, risks of deteriorating macroeconomic conditions due to war, risks of lower-than-expected global economic growth, risks of government policies in domestic and international trade support falling short of expectations, risks of delays in the distribution of subsidies for domestic and international trade.
V. Comprehensive Layout of AI Product Series by Major Companies
Key Points:
In recent years, internet giants such as BAT and ByteDance have actively invested in the AI industry, forming a comprehensive layout from models to platforms, and ultimately to applications and devices. As AI commercialization gradually enters the implementation stage, products such as Agents, AI glasses, AI headphones, and AI toys have attracted market attention, and the AI industry is expected to accelerate further. It is recommended to focus on three major investment directions: 1) Continuously bullish on government spending benefiting from domestication, with recent orders already showing signs of emergence; 2) Bullish on next-generation computing platforms and productivity tools; 3) Focus on bond and data-related assets.Platform- Application- Device Full Stack Layout. B
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3Downside risks of the macro economy: The downstream of the computer industry involves various industries. Under the pressure of a macroeconomic downturn, if the IT spending in the industry falls short of expectations, it will directly affect the demand for the computer industry; (2) Bad debt risk of accounts receivable: Most computer companies operate on a project-based basis, and they need to receive payments after the acceptance process. A longer payment period for downstream customers may increase bad debts of accounts receivable and may further lead to impairment losses of assets; (3) Intensified industry competition: The demand in the computer industry is relatively certain, but intensified competition on the supply side may lead to changes in the industry landscape; (4) Impact of changes in the international environment: Intensifying international trade frictions, continuous pressure on China's technology by the United States may affect companies with a high percentage of overseas income.Sixth, the continuous landing and optimization of AI applications
Core viewpoint:
On November 27th, 360 launched "Nano Search", with four core capabilities of "search, learn, write, create", transforming search results into creative resources, with over 1 million visits on the first day of launch. Apart from "Nano Search", the current mainstream AI search products can be mainly categorized into "web content integration" and "answer generation". The former mainly adds AI summary functions to existing search engines, while the latter emphasizes directly generating answers that users need. With the continuous iteration of AI search products in recent months, diversified products can better meet user needs, and the penetration rate of AI search is expected to continue to increase. It is recommended to focus on three major investment directions: 1) continue to be optimistic about benefiting from the increase in government spending on localization, with frequent orders appearing recently; 2) be optimistic about new generation computing platforms and new generation productivity tools; 3) focus on investment targets related to debt restructuring and data elements.
360 launches "Nano Search", realizing "search as creation". On the evening of November 27th, 360 officially launched the new multimodal content creation engine "Nano Search", which has built a complete workflow with four core capabilities of "search, learn, write, create". Specifically, "Nano Search" starts with search, allowing users to search through various modes such as voice, text, photos, videos, etc. At the same time, "Nano Search" has also encapsulated functions for high-frequency scenarios such as food reviews, calorie calculations, posting on friends' moments, etc., significantly improving the usability of responses; after obtaining results, "Nano Search" can deeply learn and analyze content, not only providing comprehensive answers to users but also providing a knowledge base for future creation; in terms of "writing", "Nano Search" emphasizes that both images and videos can be rewritten, document editing and summarizing, video content conversion to other forms such as talk show or narration, etc., are all achievable; finally, "Nano Search" achieves "everything can be created", where any content can be automatically generated into a video, significantly lowering the threshold for creators. For example, in live streaming e-commerce, by uploading a solo video and inputting a product description, a corresponding video with a voiceover will be generated. We believe that "Nano Search" further advances the AI search track into the field of creation, transforming all search results into creative resources, thereby better serving users' work needs. According to China Radio International, as of the afternoon of November 28th, Nano Search has quickly risen to the 30th spot on the iOS App Store efficiency ranking; data shows that Nano Search has already exceeded 1 million visits on its official launch day.
Prior to "Nano Search", the mainstream AI search products can be mainly categorized into "web content integration" and "answer generation". The former adds AI feature modules to traditional search engine products, such as Google AI Overviews and Baidu AI Smart Answers; the latter is a more common form of AI search, usually directly answering questions in a conversational manner and providing reference links, with main products including New Bing, Perplexity, Baidu Wenxiaoyan, Mita AI Search, etc.:
1) "Web content integration" AI search products:
AI Overviews: In May 2024, Google launched the AI Overviews service at the I/O conference, allowing people to search through AI in a question-and-answer or chat manner and receive AI-generated answers. From the interface, AI Overviews is located at the top of the search page, where users can see AI content summaries from multiple websites, thus quickly obtaining answers to questions. In October, the AI Overviews ads officially launched, allowing users to see relevant product advertisements in AI-generated summaries when performing specific searches on Google.
Baidu AI Smart Answers: Baidu AI Smart Answers also adds AI capabilities to existing search engines, where Baidu automatically calls on AI Smart Answers when users search, providing complete response results; in some queries like "which is bigger, 9.11 or 9.8", Baidu AI Smart Answers dynamically set the AI response entrance, allowing users to choose whether to use the large model for answering; additionally, Baidu AI Smart Answers can identify intent and call the corresponding intelligence body, making it easier for users to obtain more specific and effective information; moreover, Baidu search AI functionality also has multimodal capabilities, not only recognizing images but also interpreting medical reports, creating images, etc. On November 21, 2024, Li Yanhong revealed at the third-quarter earnings call that over 20% of the search results pages on Baidu already contain AI-generated content, a 2-percentage point increase from the previous quarter's 18%.
2) "Answer generation" AI search products:
New Bing: New Bing is an intelligent search engine developed by Microsoft based on ChatGPT, which accesses the Internet to retrieve various information and provide feedback to user queries. New Bing's multimodal capabilities can display relevant images or videos below text-based results, making it more visually appealing. Moreover, New Bing also has a history feature, keeping dialogue history so users can continue questioning on the same topic at different times.
Perplexity: Perplexity launched an AI conversational search engine as early as August 2022, where users can ask questions to the Siasun Robot&Automation assistant, which will real-time response with information obtained from the internet and its sources. From a search perspective, Perplexity provides exploratory module, search module, academic module, video module, and social media module, allowing users to search for specific information in specific fields, not only searching and exporting valuable reports but also categorizing and storing them for user reference. Additionally, Perplexity provides a series of related questions below AI responses to further engage user interest. In terms of user volume, Perplexity AI attracted 2.2 million visitors in its first month online.According to foreign media statistics, the current individual search frequency of Perplexity is about three times that of Google, and it is expected that the monthly active users may reach 100 million by the end of 2024.Baidu Wenxiao Yan: On September 4, 2024, Baidu's Wenxin Yiyun APP was renamed as Wenxiaoyan after one year online. Positioned as Baidu's "new search" intelligent assistant, it introduced capabilities such as rich media search, multi-modal input, text and image creation, high-fidelity DIGIHUMAN, as well as AI functions like online memory and free subscription. The memory capability is achieved through a memory book, which not only allows "Wenxiaoyan" to permanently record information that users want to remember, but also supports subscribing to information for future time periods, providing more personalized services. The multi-modal capability allows "Wenxiaoyan" to support various types of material input such as documents, images, and voice, as well as output in various forms such as text, voice, and calls. The creation capability refers to "Wenxiaoyan" supporting functions such as resume editing, thesis editing, photo and text writing, image searching/generating/editing, among others, better meeting user needs.
Mita AI Search: Mita Technology launched Mita AI Search in February 2024, expanding from legal and other vertical fields to general fields. In terms of content presentation, Mita AI Search is more in line with the usage habits of knowledge/research workers, generating results in a structured and summarized form. Its unique library and podcast search further broadens the sources of language. Additionally, Mita AI Search supports functions such as writing articles, generating mind maps, and creating PPTs. By combining efficient workflow task management, it comprehensively serves users' office needs. Furthermore, Mita Search recently launched a feature that allows users to create collections, enabling users to collect specific content they have generated or queried, forming their own exclusive knowledge base, which helps improve search accuracy by narrowing down the scope of search.
AI search products are rapidly iterating, and penetration rates are expected to continuously increase. In general, "web content integration" AI search products mainly add AI summary functions to existing search engines, allowing users to understand the content of the links more conveniently. "Answer generation" AI search products go a step further by emphasizing directly generating the answers users need, rather than providing a list of web pages that may or may not contain the answers. 360's "nano search" links search with creation, converting search results into creative resources to better cater to the trend of mass creation in the short video era and meet user needs. In recent months, AI search products have been continuously iterated, mainly focusing on expanding information sources, improving search breadth, targeted domain searches, and other optimizations. "Nano search" updates product forms from a creation perspective, and with diverse products, better meets user needs. The penetration rate of AI search products is expected to continue to increase.
Summary: On November 27, 360 launched "nanosearch" with four core abilities of "search, learn, write, create," converting search results into creative resources, with over a million visits on the first day. Besides "nanosearch," current mainstream AI search products can be classified into "web content integration" and "answer generation." "Web content integration" mainly adds AI summary functions to existing search engines, while "answer generation" directly generates the answers users need. With continuous iteration of AI search products in recent months, diverse products can better meet user needs, and the penetration rate of AI search is expected to continue to increase.
Risk Warning:
(1) Macro-economic downturn risk: The downstream of the computer industry involves various industries. Under the pressure of macroeconomic downturn, if IT spending is lower than expected, it will directly affect the demand of the computer industry.
(2) Bad debt risk of accounts receivable: Most companies in the computer industry rely on project-based contracts for business, and they need to receive payments after acceptance. A lengthening payment cycle by downstream customers may increase bad debts of accounts receivable, further leading to asset impairment losses.
(3) Intensified industry competition: The demand in the computer industry is relatively certain, but intensified competition on the supply side may change the industry landscape.
(4) Impact of international environmental changes: The escalation of international trade frictions, the continuous pressure on Chinese technology from the United States, may have an impact on companies with a high proportion of overseas income.
This article is sourced from a research report collection released by China Securities Co., Ltd .; GMTEight Editor: Wenwen.