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In our discussion about the hype that AI has brought to China's onshore equity market, we concluded that judging whether the hype in the capital market will bubble or sustain the growth highly depends on the development of more commercial applications. After all, there are many gold rush opportunists in China's onshore market, but for the growth to sustain, there have to be end users who actually use the technology in their daily lives.
In today's post, we will provide updates on exactly that aspect—are people actually using generative AI technologies in China?
A surprising figure
I didn't plan to make this post, but rather, I thought of doing an extra post because I noticed something very surprising while working on a data analysis project for my client today. I accidentally discovered that the online sales of AIGC-related books and audio products have surged four times in just five months, starting from almost nothing back in January 2023. When you delve into these products, you will find tutorials and online classes on the practical use of AIGC in business, AI drawing for marketing, an overview of chatGPT and AIGC developments, practical prompts for the Midjourney, and many more.
This growth is fast, truly fast. Think about that: GPT was released in November last year, and in just half a year, people are selling books and tutorials like professionals. In fact, when I tried searching for the term "AIGC" in Amazon's book department, with shipping to Brooklyn, New York, almost all the items that appeared on the first few pages were from China.
That's when I realized that this AI hype has escalated. You have to understand that Chinese people are not stingy when it comes to paying for books, new information, courses, training, and tutorials. Among these generous investments in knowledge, many people are motivated by learning new knowledge to gain an information edge so they can monetize new opportunities. (We can do a whole other post on this topic.) Therefore, when people are pouring money into AIGC-related materials, you know that this time AIGC is not just a concept inflated by public companies to boost their stock valuations.
Digital twin in live streaming e-commerce, at a whoppingly low cost
Live streaming e-commerce may just be the most unique business model that works really well in China. While traditional shopping platforms like Tmall and JD struggle to maintain growth momentum after Covid, live-streaming platforms like Douyin and Kuaishou are expanding at a double-digit year-on-year rate. Email marketing may dominate marketing strategies in North America and Europe, but in China, you need to put the items right in front of the customers, engage them, and walk them through why they need to buy with all your enthusiasm.
This is where the digital twin host comes into play. The Tencent News team recently published a story on how live-streaming e-commerce businesses are using the digital avatars of their hosts to sell merchandise. Surprisingly, the one-time cost of buying a digital avatar of yourself may cost as low as 400 Yuan (which is roughly 56 USD).
In a skyscraper located in the bustling area of Hangzhou, there is an empty office space spanning 200 square meters. However, instead of real human anchors, more than 20 digital humans have taken their place and are currently live-streaming and promoting products.
Every day, people who come here for business inspection can see the words "Metaverse Virtual Human Research Institute" at the entrance. A woman in her 60s exclaims loudly, "Look, this is how digital avatars have liberated real humans. Real people can sit here and relax, chat." The woman is recording a video with her mobile phone. She traveled all the way from a small village in Xuancheng, Anhui Province, and has been visiting onsite for over ten days. She believes that soon, the digital humans she just purchased will help sell walnuts from her hometown even better.
The woman previously referred to as the "real person" is named Yueyue and is currently sitting in front of a monitor. Her virtual avatar is displayed on the computer screen, with fair skin, rosy cheeks, and she is enthusiastically recommending a "must-try" durian cake, warning that if you miss it, you'll regret it.
Within a week of using digital avatars for live broadcasting, Yueyue laid off more than ten hosts who had been with her for five or six years.
Three months ago, she and several e-commerce partners established a company in the digital avatar business with a positioning that sounds upscale: "Digital Human Comprehensive Service Provider." To put it in a simpler way, it means they are not selling digital humans ("digital humans will definitely be free in the future, believe it or not?" [said Yueyue] ), but rather selling supporting operational services ("Without proper operation, even with digital humans, you won't make money.").
"We don't sell digital humans, we sell solutions."
Yueyue explains that a digital human, along with operational training, is sold as a package with a price tag of 4,980 yuan (~695 USD). The technology is provided by a company in Guangzhou. Prior to going live, they feed the software with scripts. In just three seconds, the software can generate ten thousand words of dialogue. Then they select scenes, match them with corresponding product links, set up scheduled playback, and create a digital human live stream that can loop indefinitely. For their live streams that sell coupons for dining, snacks, and offline stores, viewers typically stay for no more than a minute, and if they're quick, they make a purchase and leave within 30 seconds. Within a short period of time, perhaps the audience doesn't even realize it's a digital human. Even if they do, it doesn't matter. Their purpose is to make purchase, not to watch a performance.
In the following four days, I see Yueyue's digital avatar working on nearly 30 monitors, but I have never witnessed her personally doing a live stream. Therefore, it's easy to understand why Yueyue had to lay off employees. It was a substitution of more than a dozen employees with a dozen digital avatars. To demonstrate how cost-effective this is, Yueyue calculated for me. The monthly salary of an ordinary employee is 12,000 yuan. They can do live streaming for a maximum of six hours a day, with sales ranging from a few hundred to several thousand yuan. On the other hand, her digital avatar, with a one-time cost of 4,980 yuan, can be used for a lifetime and can broadcast 24 hours a day, generating sales of over 10,000 yuan.
Yueyue's digital avatars
Note: Above is my redacted translation of the story published by Tencent News Team. I encourage anyone who is interested to read the original, which also discusses the potential impact on the jobs of traditional broadcasters and the future of the industry.
Taobao shop automated by AI
Apart from the digital avatar for live-streaming sales, someone already opened a Taobao shop that is fully automated by AI. From the very beginning, the author started by asking chatGPT, "Tell me the steps of opening a shop on Taobao." — so that means starting from absolutely nothing. Following that, all the store designs, product pictures, product descriptions, marketing content, order management, and sales analytics are either completely created by AI or supported by AI.
Although it's a fake store, someone ended up placing orders after it opened on Taobao.
He might be one of the few to actually open an AI-automated store, but many are selling courses on how to open one
BigOne Labs' data shows that mentions of AIGC-related keywords, such as "Midjourney," surged 10 times in June compared to earlier this year on Xiaohongshu, a leading social media platform in China.
On Xiaohongshu, people are selling courses on Midjourney prompts, and many of these tutorials are packaged as a "comprehensive and systematic introduction to complete AI techniques and monetization strategies.”
That's a lot of words. More words than you would expect from an introduction to a course on a college syllabus. On a Xiaohongshu post advertising a course called "Super professional guide to AI drawing - Advanced Midjourney training for prompt engineers," the course is advertised to be backed by a "renowned publishing house" and offers the "highest dimensional systematic training" (whatever that means). The course not only offers mid-journey basics but also monetization strategies, and two extra "electives" on ChatGPT and e-commerce operations on Xiaohongshu. The course is offered at 998 Yuan (~140 USD).
Some people are even asking in the comment section whether they will be connected with job opportunities if they sign up for the courses, and the organizer responded, "Only if you study well.”
Class group chat No.5 already has 470 members, and four other similar groups have already been filled up. These people come from various fields. Some operate their own e-commerce businesses, some want to learn marketing techniques, product designs, and packaging designs, and some want to find ways to earn extra income beyond their full-time job—but without exception, they are here hoping to catch up with the latest tech so they hold an informational edge to catch the early wave.
And this is just one example along with the 2.7 million Yuan books on AIGC-related content sold on Tmall, JD, and Douyin in June. And remember that the market grew four times since March when the GPT4 was released.
screenshot of a Midjourney course sold on Xiaohongshu
So, what's the implication?
My direct take on this is that e-commerce will create huge opportunities for downstream applications of generative AI in China. The large population size in China has created a very unique environment where the platform economy works really successfully in China. As internet traffic approaches saturation, internet giants no longer have room for incremental traffic growth. However, generative AI will become the next growth point in the face of saturated traffic.
Imagine companies such as Douyin, Bili, and Meituan using software to replace traditional TV sales, media companies, and call-to-delivery services, turning into hundred-billion-dollar companies. Imagine AIGC tech revolutionizing these industries again and replacing all the real humans (well, maybe not all of them, as digital avatars increase their presence online, for sure one day people will develop fatigue towards some of it).
So I don't think the hype around GPT in the equity market is unsustainable, although it may go through fluctuations. The enormous customer base in China means that there are still many areas where efficiencies can be improved with the help of AI. This represents growth potential.
But, what's the implication for the even longer term?
But this prompts me to think—can everyone benefit from this upside?
In my opinion, the growth of digital and AI-driven businesses is very much like the “Reform and Opening-Up”, where a small group of people become wealthy first. In the context of AI businesses, the small group effectively consists of the people who hold the information edge and computing resource: the first set of groups who take control of the computing infrastructure and those who utilize the technology to improve efficiency, thus squeezing out other competitors and gaining a price advantage.
But what about the rest?
I recently came across an article that discusses how AI data annotation has become an emerging profession. For instance, in a small village town located in Linfen, Shanxi province, AI data annotation companies employ a large number of female data annotators, many of whom are mothers with limited opportunities for higher education.
The work environment of a data annotation company in Shanxi Province. Photo credit: Qiuyu Zhu.
I admire the fact that the new profession gives people with limited education an additional source of income, and they may continue to benefit as the AI industry continues to grow.
But this cannot stop me from pondering: what happens when the annotation work is done? Do they manage to grow as the industry grows by learning transferable skills? Will they leave a legacy?
The generative nature of AI takes input from human activities, expressions, personalities, and values. The creative nature of AI requires a constant input of diversity from humans. In an era where people increasingly demand to embrace personal interests and individualities, why can't they monetize their unique values, viewpoints, and creative efforts? What about having a digital twin that leases your personal figure, not just the image but also your unique personality? (That way, people can be rewarded for embracing their individuality.) What about paying the end-users who actually contribute to the training of AI for the data they provided, instead of aggregating all the personal input at the platform level? (Just as Reddit wants to be paid for the text training data, what if we had a mechanism to not only pay the platform, but also the end-users who created the text in the first place?) If you work on an assembly line, you get paid one time for the hours you spend. But in the age of AI, shouldn't we get paid for the content we create and our individuality?
Much like many people who rode the wave of the growing internet economy in the past decade, many found themselves unemployed and struggling to advance their careers as the tide recedes. May our unique values and creative efforts leave a legacy, as all of us ride this round of waves.
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