How are Alibaba's AI-driven innovative businesses performing?

On February 11, Jack Ma made his first appearance at Alibaba's Xixi campus in Hangzhou during the Year of the Snake. My sources indicate that Ma visited the offices of Xianyu and Quark, both under Alibaba's Intelligent Information Business Group. He was accompanied by Xianyu President Ji Shan and Alibaba Group CEO Wu Yongming, respectively.

Xianyu and Quark are part of Alibaba's first batch of strategic innovation initiatives, known as the "Four Little Dragons." In November 2023, Alibaba CEO Wu Yongming announced these strategic innovations: 1688, Xianyu, DingTalk, and Quark. The criteria for selection included a substantial market space, unique market positioning, alignment with user demand trends, and alignment with the group's "AI-driven" strategy.

Wu Yongming also stated that these businesses would operate as independent subsidiaries, breaking through previous group limitations. Alibaba plans to continue investing in them over a 3-5 year cycle.

This move follows Alibaba's proposal of the "AI-driven" strategy. By investing in AI infrastructure and developing applications for both B-end and C-end, Alibaba seeks to foster change, activate new growth, and discover new entrepreneurial paths. As Wu Yongming puts it, "Regardless of past success, we must start anew and awaken the mindset of entrepreneurship."

As the soul of Alibaba, Jack Ma, although no longer in the frontline, sends clear signals during critical junctures to stabilize or mobilize the troops. His recent public appearances coincide with Alibaba's restructuring and reinvigoration.

From my observations, since late 2024, Jack Ma, who had kept a low profile, has made significantly more public appearances. For instance, his visits to the establishment of Alibaba's E-commerce Business Group and the 20th-anniversary events of Alipay and Ant Group coincided with pivotal moments in Alibaba's business restructuring.

This time, Jack Ma's visit to Alibaba's innovative businesses reflects their external attention. Xianyu, with over 500 million registered users and a post-95s user base exceeding 40%, faces commercialization challenges. DingTalk, a digital foundation for many enterprises, grapples with "monetization" issues. Quark and 1688, on the other hand, seem to be progressing more smoothly.

Quark has emerged as a flagship of Alibaba's AI on the consumer side. Long focused on the B-end, Alibaba has been increasingly active in the C-end since late 2024, demonstrating its determination to compete through business integration, talent acquisition, and product layout.

Key developments include the December 2024 spin-off of the AI application "Tongyi" from Alibaba Cloud into the Intelligent Information Business Group, and the January 2025 merger of Alibaba's Intelligent Connectivity Business Group's Tmall Genie hardware team with the Quark product team to explore new hardware directions, including AI glasses.

On February 6, 2025, Xu Zhuhong, a top global AI scientist, joined Alibaba as Vice President, reporting to Wu Jia. He will oversee basic research and application solutions for multimodal foundational models and AI Agents for C-end businesses.

Alibaba's rare announcement of C-end talent recruitment signifies a push for its AI To C strategy. The battle for large models, beyond financial investment, relies heavily on talent and intelligence. Wu Jia, the creator of Quark and a "young and vigorous" executive, has rich experience in C-end product development.

Under Wu Jia's management, AI products like Quark, Tongyi, and Tmall Genie are focusing on Alibaba's AI To C applications. This represents a strategic shift, combining core businesses into one force, forming C-end applications represented by Quark, and covering a multi-terminal layout from productivity tools to intelligent dialogue products and AI hardware, aiming to stay competitive in the AI landscape.

Quark has evolved, upgrading its brand slogan to "AI All-rounder for 200 Million People" in January 2025. According to Analysys, Quark is currently the only AI application in China where post-00s users exceed 50%. Qimai Data's "2024 Annual Powerful AI Product Rankings" revealed that Quark's annual download volume exceeded 370 million. QuestMobile data shows that as of September 2024, Tongyi had 3.0885 million monthly active users, ranking 10th among AIGC applications.

As one of Alibaba's oldest businesses, 1688 has a clear and independent positioning, with its strategic direction set on digital supply chains. Serving as a digital chip, it integrates China's source factory goods, ready for plug-and-play use as a direct supply and sales platform, covering areas with traffic and user demand.

Currently, 1688 has 1.07 million merchants, including over 600,000 factories. With 6 million factories in China, and 2 million above a certain scale, 1688 factories account for one-tenth of the national total, and factories above a certain scale account for one-third.

On February 10, 1688 launched the "Industrial Belt Strong Recovery" investment attraction activity, targeting source manufacturers in industrial belts. It focuses on factories undergoing generational succession, accelerating digital transformation, embracing AI technology, and exploring cross-border markets, particularly brand OEM factories with capabilities for small-order quick turnaround and light customization, as well as "specialized, refined, characteristic, and novel" enterprises.

To complement this, 1688 announced five "breaking the deadlock" initiatives. Merchant data on the 1688 platform reveals five new business opportunities beyond the wholesale model, showcasing the potential for a strong recovery in industrial belts.

Among these initiatives, 1688's AI progress stands out. All AI products for merchants are now free. For example, the new free AI digital employee saves an average of four manpower and reduces business difficulty by 80%. It can grasp the boss's communication tone and scripts, possesses professional abilities in cost accounting and quotation logic, maintains stable emotions, and works 24/7 without wages.

1688 has access to DeepSeek, which will gradually open to merchants starting from mid-February. Additionally, 1688's business large model based on DeepSeek will launch in February, significantly enhancing merchants' business decision-making capabilities and effectiveness.

Beyond basic e-commerce, Alibaba's innovative businesses possess rich market imagination and AI creativity, crucial for seizing the AI wave and leveraging youth. Notably, Jack Ma's emphasis on AI is reflected in Alibaba's strategy, and he has repeatedly stated that "the era of AI e-commerce has just begun, presenting both opportunities and challenges for everyone."

This means that the e-commerce era king is also at a new starting line. In the AI melee, Alibaba's advantages and disadvantages are evident:

On one hand, Alibaba boasts strong competitiveness in the AI industry chain, resources, data, and application scenarios. Platforms like Taobao, Tmall, and Alibaba International have released multiple AI tools to aid merchants. In the past two years, Alibaba has made comprehensive layouts in AI infrastructure and product applications. With the "AI+Cloud" business model maturing, it continuously drives Alibaba's performance growth. Public cloud products, including AI-related ones, have achieved triple-digit year-on-year growth for five consecutive quarters.

On the other hand, with the rise of DeepSeek around the Chinese New Year, AI applications have exploded. Companies with users and product capabilities have a head start. However, Alibaba lacks experience in creating super user products, posing a significant challenge for increasing C-end application investment. As an e-commerce platform, Alibaba excels in B-end business but has unsuccessfully attempted social applications in the past.

Yet, Alibaba has weathered the storm. A positive sign is Apple's choice of Alibaba to develop AI functions for Chinese iPhone users. Next, we will see how e-commerce and innovative businesses like the "Four Little Dragons" create truly valuable products and services in the AI era, fulfilling Jack Ma's expectations.