Written by Qigong

In 2024, Kuaishou faces an increasing number of challenges that need to be addressed.

In addition to the fact that e-commerce GMV (Gross Merchandise Volume) no longer exceeds expectations, the 'black hole effect' of short videos is gradually fading, and the heavy concentration of resources in local life has proven unable to bear significant responsibilities. These operational issues have widened the gap between Kuaishou and its competitor Douyin, and the brain drain within the organization is equally severe.

According to Jie Dian Finance, Kuaishou has experienced frequent personnel changes this year, with key positions repeatedly losing their 'generals'.

01 Key Positions Repeatedly Losing 'Generals'

Recently, it was rumored that Yuan Shuai, Vice President of Kuaishou's Magnetic Engine and head of the short video business, had left the company months ago, with his whereabouts unknown.

Yuan Shuai joined Kuaishou in 2019 and has held various positions, overseeing important departments such as music, creator services, commercialization, and the Magnetic Star program. At the end of 2023, he was entrusted with leading the development of the Magnetic Engine and short video business.

Yuan Shuai's last public appearance was on April 12th, when he attended the Kuaishou Magnetic Engine 'Star Gravity' short video merchant spring private sharing session.

At the sharing session, Yuan Shuai announced that in addition to adjusting the risk control policies for short video merchants, Kuaishou had also launched the 'Short Video Nova Plan' to support their long-term operations. This plan served as a boost for merchants present, allowing their brands and products to be seen by more users and enhancing their reputation.

Yuan Shuai's abrupt departure may be related to Kuaishou's loosening foundation and unclear future prospects:

Since focusing on e-commerce, Kuaishou's GMV growth rate has remained around 30%, but fell to just 15% in Q2 2024, suggesting a setback before success.

Monthly Active Users (MAU) have declined for two consecutive quarters, by -0.4% and -0.8% respectively, indicating that as the demographic dividend wanes, Kuaishou is gradually entering a period of decline.

The live streaming segment has taken a sharp downturn since Q2 2023, with Q2 2024 revenues decreasing by 6.7% year-on-year, highlighting that Kuaishou's 'ballast stone' is no longer stable.

Despite these challenges, Kuaishou remains the second-largest player, but its pace of catching up is becoming increasingly sluggish, while Douyin's advantage continues to expand, accelerating the consolidation of its dominant position.

Additionally, Song Yang, Vice President of Kuaishou and head of its recommendation algorithm, has left the company, with his last day being May 31st. Reports suggest he has returned to the United States and may join TikTok, or alternatively, has rejoined Google.

According to records, Song Yang joined Kuaishou in June 2020 as Vice President (at the M4B level) and head of the Model and Application Department in the Kuaishou Community Science Division, overseeing recommendation models for Kuaishou's short videos, live streaming, e-commerce, and advertising. At the end of 2023, he was transferred to the search department.

It doesn't stop there. Kuaishou has also lost Liu Qi, Chief Audio and Video Architect, and Fu Ruiji, Technology Leader for Knowledge Graph and Large Model Agent, who left the company in April and May, respectively.

During his tenure, Liu Qi participated in the development of products such as Kuaishou Cloud Editing and StreamLake. Fu Ruiji, on the other hand, is a prominent figure in artificial intelligence and served as Deputy Dean of iFLYTEK's AI Research Institute before joining Kuaishou's MMU in March 2021, where he led the development of 'KuaiZhi,' the industry's first billion-scale multimodal short video encyclopedia knowledge graph, and KwaiAgents, Kuaishou's large model agent technology.

02 Internal Governance Flaws

At the organizational level, Kuaishou faces not only brain drain but also significant challenges in internal governance.

In early September of this year, an email alleging that a Kuaishou employee had leaked core company data and strategic plans, leading to a drop in share prices, circulated online. The email was sent to several senior executives at Kuaishou, including co-founder Cheng Yixiao.

Subsequently, Kuaishou issued a disciplinary notice stating that an employee from the Finance/Business Analysis Department had abused their position to repeatedly query and download company business data, which they then disclosed to external consulting firms for profit, causing significant losses and adverse effects to the company.

The notice stated that the employee's actions violated Kuaishou's regulations and constituted a serious disciplinary violation. Kuaishou reserved the right to pursue legal action against the employee, who was also terminated from employment, publicly named, and stripped of all long-term incentives.

This incident exposed numerous flaws in Kuaishou's internal governance. As the company grows, strengthening the protection of trade secrets and intellectual property, as well as establishing sound internal control and risk warning mechanisms, will become critical issues for Kuaishou.

In fact, similar incidents are not uncommon among internet giants like Kuaishou.

In July 2020, Zhao Danyang, former head of the Kuaishou Research Institute at Beijing Dajia Internet Information Technology Co., Ltd., was arrested on suspicion of embezzlement and later sentenced to seven years in prison and fined 700,000 yuan by the court.

At the end of 2019, an employee surnamed Xu from Kuaishou's Business Analysis Group in the Business Analysis Department was dismissed after leaking the Spring Festival Gala marketing plan, K3 strategy, and e-commerce data and strategies to the media. Their personal options were also forfeited.

03 Can Betting on AI Break the Commercialization Impasse?

Whether it's operational or organizational issues, they both reflect the looming 'ceiling' and limited growth potential of Kuaishou. Where can the company find new engines and increments?

From a business perspective, Kuaishou is placing its bets on AI. However, Fu Ruiji's departure may have some impact on this newly opened avenue.

Prior to Fu Ruiji, Li Yan, head of Kuaishou's Multimedia Understanding (MMU) division and a core figure in the company's AI technology, also chose to start his own business amidst this unprecedented technological wave.

While Kuaishou publicly intensified its focus on AI at the beginning of 2023, it had already made significant investments in AI for years, spending a cumulative total of 46.7 billion yuan on AI research and development over the past three and a half years.

During its second-quarter earnings call in 2024, Kuaishou emphasized its commitment to the AI strategy while announcing its financial results. Cheng Yixiao, co-founder, chairman, and CEO of Kuaishou, also noted the critical importance of AI technology for the company's future development.

However, it cannot be ignored that AI large model research and development has a long monetization cycle, a reality recognized across the global tech industry. In China, companies must also confront the challenge of homogenization and intense competition, with giants like Alibaba, Tencent, ByteDance, Huawei, and Baidu all focusing their efforts. The current situation can be aptly described as a 'Hundred Models War.'

Kuaishou has launched a new generation of AI creative productivity platform, Keling AI, which focuses on text-to-video generation. Based on real-world physical rules, Keling AI can produce cinematic-quality visuals and dynamic effects.

Image source: Keling AI official Weibo

For example, in mid-July this year, director Chen Kun completed China's first Generative AI (AIGC) short film, 'The Miraculous Journey of the Mountains and Seas,' with the support of Keling AI. The film was released on Kuaishou and received over 10 million views.

However, in terms of profitability, an internal source at Kuaishou revealed that although the company management disclosed that over 1.6 million people have used Keling AI, the number of paying members is limited. At present, the product needs to be recognized by more creators for its value, and only by opening up the market for professional services can the pressure of commercialization be alleviated.

Jie Dian Finance has learned that Keling AI's membership system includes Gold, Platinum, and Diamond memberships, with corresponding undiscounted annual fees of 792 yuan, 3192 yuan, and 3996 yuan, respectively.

Chen Zemin, Chief Analyst of the Media and Internet Group at GF Securities, believes that AI commercialization is indeed something that Kuaishou is currently pursuing, but its longer-term consideration should be to address the challenge of 'where to find growth.'

In other words, relying solely on AI to break the shackles of growth may not provide an immediate solution.