At 7 pm on March 31, Luo Yonghao went live for the first time to sell "cloud", with thousands of enterprises placing orders online.

Author: Xi Wen

- 01 -

In Taobao's live streaming room, Luo Yonghao was passionate in front of the camera. The product he was selling this time was definitely fresh in the live streaming industry.

Whether it's Viya selling rockets or Country Garden selling houses live, they all pale in comparison to Luo Yonghao today. Today, Luo Yonghao is selling "cloud".

"Recently, some entrepreneur friends have sought our help, saying that IT costs are high: expensive human resource expenses and large R&D investments. But the solution is actually very simple, just go straight to the cloud."

Luo Yonghao recalled his entrepreneurial experience. "In the early 2000s, I spent a lot of money renting server rooms, buying physical servers, and installing them myself. During sudden traffic surges, I couldn't expand capacity. When I was making Smartisan phones, every launch event would usher in a flood of traffic, with traffic volumes up to a thousand times higher than usual. If we still had to set up our own servers, the cost would be unbearable."

During this live broadcast, Luo Yonghao launched an "Alibaba Cloud Special," with a total of 8 products, including core products such as cloud servers and cloud storage, as well as popular products such as website filing and construction. Among them, enterprise-level cloud servers are available for as low as 168 yuan per year, and they were once snapped up and had to be relisted.

For this Alibaba Cloud Special, some popular product prices were reduced to 0.66 off.

According to official government data, there are 180 million market entities in China (including individuals), including about 52 million SMEs. Among them, 99% of enterprises need "cloud".

There are about 1.1 billion internet users in China, and one of the foundations behind the websites, apps, SaaS, databases, large models, etc., that they use, is "cloud".

Once the price of "cloud" drops, 180 million market entities and 1.1 billion users will benefit. This benefit is not just talk, but real money helping enterprises reduce costs.

Entrepreneur Zhang Fang was one of the million viewers of this live broadcast. This scene directly stunned him.

He is an AI entrepreneur who has been dealing with "cloud" (Alibaba Cloud) for the past 8 years, spending millions of yuan annually on related expenses: he has 7-8 products, all of which rely on "cloud".

"Roughly calculated, the price reduction in this live broadcast can save me tens of thousands of yuan." Although the company has completed 5 rounds of financing with a total amount exceeding 200 million yuan, the savings still made Zhang Fang particularly pleased.

At the beginning of 2024, the downward trend in the price of "cloud" has been rapid.

Just a month ago, Alibaba Cloud announced its largest price reduction in history: "with an average drop of over 20% and a maximum drop of 55%, involving over 100 products and more than 500 specifications, covering all core products such as computing, storage, and databases."

In March 2024, Alibaba Cloud products saw a comprehensive price reduction.

This Luo Yonghao live broadcast attracted over 2.3 million people to the live streaming room, grabbing very cost-effective Alibaba Cloud products. For example, the ECS cloud server (Universal Computing Type U1 package), originally priced at 3707 yuan, has a special price of 168 yuan; and for the Alibaba Cloud Drive Enterprise Edition (2TB for 1 year), the original price is over 749 yuan, with a special price of 199 yuan.

In Luo Yonghao's view, this price is a great discount, very affordable, and not for profit, but just to make friends with everyone.

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What exactly is "cloud"? If you are a business owner, you probably already knew this 10 years ago.

Zhang Fang uses his most basic product as an example - the official website.

"Currently, there are about 20,000 visitors to the website every day. Home computers have limited configurations and cannot handle data from 20,000 users. What should be done? You can put the website on a more powerful 'public computer,' commonly known as a server. The server's computing power, storage space, and other configurations are stronger, and it can be used on demand like tap water, with pricing based on usage."

Here, all the services used by the official website (cloud servers, cloud storage, etc.) can be called "cloud".

"In layman's terms, all products that need to be connected to the internet require 'cloud,' and all products related to AI need 'cloud' even more: whether it's an official website, an app, a database, a SaaS system, or a large model, they all need 'cloud' behind them."

Of course, "going to the cloud" is not the only option: you can also purchase private "servers," but the cost difference is significant.

First is the cost of servers. According to Taobao data, the price of an entry-level server is at least 3000-4000 yuan.

Secondly, costs such as electricity, operation and maintenance, and network bandwidth are all higher than "going to the cloud".

These conclusions have been widely verified over the past 20 years, both abroad and domestically.

Dropbox is a cloud storage company with hundreds of millions of users. In its early stages of development, it adopted a privatized deployment approach, which later exposed various shortcomings as the business grew: high costs, poor scalability, and maintenance difficulties.

In the following years, it migrated some of its services to the "cloud," saving about $75 million in costs over 2 years.

PalmRead is a domestic digital reading platform with over 200 million monthly active users. Before 2020, it adopted privatized deployment, and then gradually "went to the cloud" over the next 3 years: bandwidth costs were reduced by 50%, resource costs were reduced by 30%, and IT costs were reduced by about 20%.

Another reason for the high cost is that cloud computing has better scalability. "Cloud" is like tap water, paying as you go. Privatized deployment is different: purchasing equipment is a one-time expenditure, which can easily lead to idle costs.

Miaoya Camera's experience perfectly illustrates this point.

Last August, Miaoya Camera became a sensation. It is an AI (large model) photo application that can help you generate various ID photos, portraits, etc. Less than a month after the product went live, it continued to be popular, with computing power demand skyrocketing hundreds of times.

During peak hours, there were once 4000-5000 people queuing, waiting for more than 10 hours to get their photos.

In this situation, private cloud deployment would be very troublesome, requiring the procurement of a large number of servers in a short period of time, which would be costly. Taking the graphics card (NVIDIA) inside the server as an example, the price of certain models exceeds 2.5 million yuan per card.

More importantly, the number of user visits fluctuates greatly. After the peak period passes, these servers will be largely idle, with poor scalability and a lot of wasted resources.

Data shows that the average resource utilization rate of a large number of locally deployed servers in China is less than 5%; while public cloud vendors such as Amazon, Alibaba Cloud, and Google can achieve data center resource utilization rates of 25%-40%.

Against this backdrop, Miaoya Camera solved the problem by urgently expanding capacity through Alibaba Cloud.

"Cloud" has excellent elasticity, allowing users to access and purchase as much as they need.

Taking Alibaba Cloud as an example, if you are a startup, you can purchase a "basic plan"; if you are a growing enterprise, you can purchase an "enterprise plan".

Using servers for mini-programs as an example, Alibaba Cloud's economical e-type costs less than 100 yuan per year and can support about 100 concurrent visitors; while the universal computing type u1 can support about 300 concurrent visitors for less than 200 yuan per year.

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According to the objective laws of the past 10 years, the cost of "cloud" will continue to decline. "Cloud" is subject to the same "Moore's Law" as chips.

In 1965, Gordon Moore made an observation: the number of transistors that can be accommodated on an integrated circuit approximately doubles every two years. This means that the cost of computing power with the same configuration will decline sharply.

"Cloud" itself is a form of computing power.

An objective reality is that over the past 10 years, "cloud" has become increasingly friendly to entrepreneurs and more affordable by releasing technological and scale dividends.

Taking Alibaba Cloud as an example, over the past 10 years, its computing costs have been reduced by 80%, and storage costs have dropped by about 90%.

Li Liqun is an entrepreneur in the cultural and creative field who owns five products: a website, an app, a mini-program, SaaS, and a database. The website alone receives about 50,000 visits per day.

"Eight years ago, I was a customer of Alibaba Cloud, and I still am. Over the past 8 years, my cloud service costs have decreased annually and are now as low as 5000 yuan per month (for all expenses)."

Liu Xingjie, an IT expert from Pencil Road Think Tank, said that these results are partly attributed to technological advancements, such as underlying chip hardware, the Feitian cloud operating system, and the Pangu storage system.

On the other hand, it is attributed to the dividends brought by scale. "Alibaba Cloud is Asia's largest cloud service provider, providing a reusable global cloud computing resource pool for millions of customers. The more customers use it, the lower the supply chain procurement costs and amortized R&D costs will be."

In short, the more enterprises use it, the cheaper the price of "cloud" will be.

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A major trend in the future is that enterprises will be founded, grow, and succeed on the "cloud".

MiHoYo is a typical example. Founded in 2011, it is a gaming unicorn company (Pre-IPO stage) with annual revenue exceeding 5 billion yuan.

In its early days, MiHoYo grew on the "cloud." At that time, the company was small in size and had limited resources, while Alibaba Cloud was also in its growth stage. Against this background, the two sides began to cooperate.

In 2020, at Alibaba Cloud's Yunqi Conference, MiHoYo shared its experiences "on the cloud" as a guest.

MiHoYo skipped the expensive investment in IT facilities and directly used computing power on the "cloud." MiHoYo's first game, "Honkai Impact 3rd," was launched with the support of Alibaba Cloud.

In the following years, MiHoYo's products became increasingly diverse, facing greater technical challenges - especially the development of "Genshin Impact," whose open-world nature placed extremely high demands on backend technology.

With the technical support of Alibaba Cloud, "Genshin Impact" was successfully launched in 2020. Since its release, "Genshin Impact" has generated over 28 billion yuan in global revenue, ranking third in global mobile game revenue.

Even now, MiHoYo and Alibaba Cloud continue to cooperate closely for common development.

MiHoYo is just one of the many enterprises.

As of 2023, the stock of (cloud) servers in the Chinese market is about 20 million units, with a penetration rate of about 28% in total computing power. This means that about 72% of computing power is not achieved through the most efficient public cloud deployment.

This shows that although cloud computing has been developing in China for more than a decade, it is still a blue ocean full of imagination.

In the United States, the stock of servers is about 21 million units, accounting for about 60% of total computing power.

Referring to the US standard, the scale of China's cloud computing industry can at least double.

Growth of the domestic cloud computing market in the past 4 years

Over the past four years, China's cloud computing market has grown at a rate of over 30% annually. It was about 209.1 billion yuan in 2020, 310.2 billion yuan in 2021, 455 billion yuan in 2022, and increased to 619.2 billion yuan last year.

In terms of competition, a "one superpower and multiple strong players" situation has formed.

According to the fourth-quarter financial report for 2023, Alibaba Cloud has a market share of about 39% in China, ranking first; Huawei Cloud follows closely with a market share of about 19%; and Tencent Cloud ranks third with a market share of about 16%.

Especially in the era of AI 2.0, under the wave of large models, computing power has become an especially scarce resource, making the importance of "cloud" even more urgent.

Some technologically advanced technology companies and AI companies have already moved their entire business to the "cloud." According to industry data, more than 80% of technology companies and over 50% of large model companies in China operate on Alibaba Cloud.

Globally, over 5 million enterprises run on Alibaba Cloud, including but not limited to Cainiao, Ele.me, China Unicom, China Post, Kuaishou, and Xpeng Motors.

In the next 10 years, "cloud" will be the starting point and the endpoint for enterprises.

The collaboration between Alibaba Cloud and Luo Yonghao to "sell cloud" this time is more precious in that it has pushed "cloud" from the professional field to the masses through live streaming, opening up an inclusive "cloud" era.

The views expressed in this article are the author's independent opinions and do not represent the position of Pencil Road or constitute any investment advice. The cover image is from the WeChat image library.