How long does it take to go from failing to full marks?

Written by | Lan Dong Business Zhao Weiwei

On February 23 this year, Kunlun Tech founder Zhou Yahui commented on WeChat Moments that ByteDance's AI strategy over the past year and a half only scored 40 points. This "honest truth" sparked controversy. How long does it take to go from failing to full marks?

On November 28 this year, Zhou Yahui reviewed his observations again, believing that ByteDance performed exceptionally well in its AI strategy this year, "meeting my expectations of this organization's rapid iteration capabilities (the ability to outdo others). The rapid iteration is truly remarkable."

Zhou Yahui's WeChat Moments in February and November 2024

In Zhou Yahui's view, ByteDance's AI strategy scores full marks primarily due to talent.

"Quickly dividing and integrating an organization of tens of thousands of people into an AI army with a golden ratio. Part of the innovation team is assigned to business lines, while another part is integrated with the search team, the Machine Learning Center, and the AI lab to form an AI army, all under Zhu Wenjia and Alex (Zhu Jun). Both are in their prime. Zhu Wenjia left a deep impression on me. Although I haven't met him and can't force a meeting, I know his story well. He was the first coder at Toutiao to launch the DNN model and generate revenue. He can be considered a younger generation leader compared to Yiming, Huang Zheng, and Jiang Fan."

The second reason for scoring full marks is the cloud strategy behind Volcano Engine.

"Earlier this year, I told an Alibaba Cloud executive that ByteDance's large model API would surely make a big splash and even force vendors to use it. I said this was the key to Volcano Cloud's rise. He didn't quite believe me. I believe the cloud is the key to ByteDance's future strategy. I said a year ago that ByteDance hadn't fully grasped it yet, but they surely would in the future. ByteDance will definitely learn from Google and Amazon, earning from both vendor advertising fees and IT expenses. ByteDance's cloud market share will surely equal its advertising market share. And I'm not just talking about China but the entire globe. The only obstacle is Huawei. Alibaba is also a contender. Wu Ma is also a formidable figure."

These two paragraphs are packed with information.

First, praise for Zhu Wenjia. Zhu Wenjia was originally the chief architect of Baidu's search department. He joined ByteDance in 2015 and subsequently became the CEO of Toutiao and the product technology leader of TikTok. Last year, he began overseeing the Seed team, the large model R&D team within ByteDance. This large model team is collectively referred to as Seed, and the Sky Lark large model serves as the technical foundation for a series of AI products, including Doubao, within ByteDance.

Over the past year, ByteDance's AI product line has also gradually expanded. Under Zhu Jun's Flow team, there are over ten products. The AI smart assistant Doubao is available not only as an APP but also has a PC version. The AI smart agent development platform has a domestic version called Kouzi and an international version called Coze. Additionally, there are products like Xinghui for image generation and Maoxiang for role dialogue.

Doubao has become ByteDance's most successful AI product, far surpassing other domestic competitors in terms of user base. According to third-party data from QuestMobile, in September 2024, the active rate of the Doubao APP reached 18.1%, an increase of 4.8% from January of this year; the average number of days used per month was 5.4 days, an increase of 1.3 days from January; and the 3-day retention rate for active users reached 39.1%, an increase of 8.9% from January.

Furthermore, the number of agents within the APP reflects the vibrancy of the C-end market. At the time, there were over 16,000 agents within the Tongyi APP, and the number of agents within Doubao, the industry leader, was about to surpass 10,000. It can be said that, compared to other internet giants, ByteDance is occupying emerging markets with efficient mobile application iterations.

It is worth mentioning that Kunlun Tech's Skywork large model ranks among the top in the active user list. It's no wonder that while giving ByteDance full marks, Zhou Yahui also gave Kunlun Tech full marks for its AI strategy in 2024.

What's also worth pondering is the cloud strategy behind Volcano Engine. Zhou Yahui pointed out the key to its rise and also the future competitive landscape.

Volcano Engine is aggressively competing in the cloud services market. In May this year, Volcano Engine, the cloud platform under ByteDance, ignited a price war by offering pricing that was 99% lower than the industry average, sparking a wave of price reductions for large models in China. Subsequently, Alibaba Cloud, Tencent Cloud, Baidu Cloud, and other large models followed suit with price reductions, stimulating corporate demand for large models and fostering innovation in the application layer of large models.

Then, in October this year, Volcano Engine launched the industry's first Feilian large model IT empowerment platform. This platform is integrated with the Doubao large model and manages core IT elements such as identity, network, terminal, and data through an All-in-One product architecture, implementing AI applications in multiple scenarios. Feilian has been providing external services through Volcano Engine since 2021, with customers and partners including JD.com, Xiaomi, Li Auto, and NIO, among other Chinese tech companies.

Over the past year, the issue of large model hallucinations has ceased to be criticized, and their capabilities have gradually improved, enabling their entry into various industries, especially in the automotive industry and embodied intelligence. A series of early-stage industries have begun to embrace AI with a new attitude.

Looking back at this year, it is evident that a stable pattern has emerged in the development of large models in China, represented by three main forces. On the one hand, there are internet giants such as ByteDance, Baidu, Alibaba, and Tencent. On the other hand, there are AI enterprises crossing over into other fields, including Kunlun Tech, SenseTime, iFLYTEK Spark, and more. Additionally, there are emerging AI forces represented by AI Spectrum, Dark Side of the Moon, Baichuan Intelligence, MiniMax, and Zero One Everything.

In Zhou Yahui's view, the only competitors for Volcano Engine in the future will be Huawei and Alibaba Cloud, which are currently the two players with the highest market share in the public cloud IaaS market.

Huawei proposed the All Cloud strategy in 2013 to accelerate digital transformation and upgrade. The goal set in 2017 was to become one of the world's top five clouds. The subsequent story is that Huawei successfully achieved this goal and became one of the fastest-growing mainstream cloud vendors globally.

IDC mentioned in its China Public Cloud Market Report for the first half of 2024 that cloud vendors with a hardware and software background, represented by Huawei Cloud, emphasize the research and development of integrated hardware and software products, earning widespread industry praise for public cloud network response, storage performance, and the Shengteng Cloud.

What share will Volcano Engine occupy in this market in the future? This is clearly one of the things Zhou Yahui looks forward to, as he is a highly perceptive observer in the internet and investment industries, and the Kunlun Tech he leads is also one of the leading players in the large model segment of the AI industry.

Since 2024, Kunlun Tech's AI large model "Blood Bag" has been fully utilized, successively releasing "Skywork 2.0," "Skywork 3.0," "Skywork 4.0" 4o version, and "Skywork 4.0" o1 version.

In addition to fully investing in the research and development of the underlying large model, Kunlun Tech has also launched AI search (Skywork AI Search), AI music (Skywork SkyMusic), AI social (Linky), AI video (AI short drama platform SkyReels), and more in other modalities.

In just over 20 days in November, Kunlun Tech successively released major announcements, including the Skywork AI advanced search function, real-time voice dialogue AI assistant Skyo, and an invitation to test the "Skywork 4.0" o1 version. Among them, the real-time voice dialogue AI assistant Skyo will be launched on the Skywork APP in December.

All of this represents Kunlun Tech's AI strength condensed over the past year. Zhou Yahui also said on WeChat Moments, "It's hard to imagine that this tech guy in his fifties is also participating in front-line R&D discussions."

Currently, Kunlun Tech's "Skywork AI" application ecosystem is well-developed, and its product matrix is well-loved by users, securing a firm foothold in the current AI market. It's no wonder Zhou Yahui gave his AI strategy full marks as well, attributing it to "sufficient differentiation, finding a niche that is small but beautiful."