An important transformation is occurring in the Chinese e-commerce environment. China’s biggest firms, including Alibaba, Tencent, and JD.com, are using artificial intelligence (AI) to supercharge their advertising campaigns, resulting in jaw-dropping revenue growth. Retail revenues under Alibaba’s commerce segment soared 16.3% year over year for the three months period ended March 31, 2023. Her total revenue for the fiscal year was 263.85 billion yuan, or $38.52 billion. This astonishing growth is a testimony to the real revolution AI-powered marketing techniques are having on consumer engagement and sales performance.
Alibaba’s Taobao and Tmall group experienced a stellar 9% growth in sales from last year. Under her leadership, they brought in record high 101.37 billion yuan (around $13.97 billion) during this period. This figure surpassed the 97.94 billion yuan projected by a FactSet analyst poll, further illustrating the effectiveness of AI in enhancing marketing efficiency and consumer targeting.
Tencent’s financial performance was similarly buoyed by the impact AI technologies. In the first quarter, the company’s “fintech and business services” segment recorded a stunning 5% YoY revenue decline. This was no small feat, generating a whopping 54.9 billion yuan. Since the deployment of their generative AI capabilities, Tencent’s online ad click-through rates have already doubled. They have jumped to close to 3%, a staggering increase from inefficiencies at historical norms of roughly 0.1% for banner ads and 1% for feed ads.
With this move, JD.com has made a clear and official bid to join their ranks. This quarter, its marketing revenues jumped 15.7% to 22.32 billion yuan. The company has made massive investments in large language models to further its advertising R&D. This effort is intended to increase ad conversion rates and drive faster revenue growth.
Alibaba’s core marketing revenue, known as “customer management,” climbed 12% YOY to almost $10 billion. The company’s AI tool, Quanzhantui, is playing an important role in improving merchants’ marketing efficiency by dynamically optimizing ad placements and targeting strategies.
Even with increasing U.S.-China tensions and a second round of tariffs hitting them in April, these companies are riding high. They still perform better than all of them, despite changing consumer preferences. Maybe. Kai Wang, Asia equity market strategist at Morningstar, called the e-commerce and ad revenues a “positive surprise.” This was surprising, especially given the large predicted effects of tariffs.
“The e-commerce and ad revenues were positive surprises as there were expectations tariffs would affect consumer behavior.” – Kai Wang
Wang further pointed to the importance of AI in improving advertising effectiveness in the face of unfavorable macroeconomic conditions. He noted the promises of AI-powered ads to create greater efficiency and targeting.
“AI ads improve efficiency and algorithm, which should translate into better targeting towards consumers even if macro conditions are not optimal.” – Kai Wang
Wang said she saw immediate signs of monetization with the complex ads. The unique benefits that AI will provide compared to other materials and methods are still in the evaluation stage.
“It is still a bit early to quantify how much incremental benefit AI ads bring compared to non-AI ads, but we have seen some monetization from AI-driven ads.” – Kai Wang
Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, expressed optimism regarding upcoming shopping events like the “618” festival. Cooke emphasized that while growth may not reach historical highs of 30%, he expects solid performance due to robust advertiser demand.
“I think we’re going to get a pretty good 618. Now obviously, we’re not dealing with 30% year-on-year growth anymore like we were in the first 10 years.” – Jacob Cooke
Tencent’s WeChat platform hit an astounding three billion average daily use hours in the first quarter. This was dramatically reflected in its combined monthly average users, which topped 1.4 billion for the first time, along with its profit increases. This massive user base creates an enticing audience for advertisers seeking to reach consumers in new, creative ways through AI-powered campaigns.
These top firms are heavily disrupting the advertising space, traditional or otherwise, with innovative AI technologies. In doing so, they are setting themselves up to weather the storms of market disruption. According to T refis’ earnings analysts, JD.com will only get better at advertising and marketing. They will do this by increasing their use of large language models.
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