China’s AI freebies are a show of fear and greed

China’s AI freebies are a show of fear and greed
Who can resist a free cup of tea? Shoppers in China briefly overwhelmed Alibaba’s artificial intelligence app over the weekend as they took advantage of a lavish Lunar New Year marketing blitz pitting the country’s top apps against one another. But one-off subsidies are a poor way to build loyalty. And turning that into AI profits is even tougher.
The $390 billion Alibaba kicked off a $400 million-plus holiday giveaway on Friday, promising users on its Qwen chatbot free drinks and other coupons.
Within the first nine hours of the campaign, the company clocked in 10 million orders of milk tea, resulting in a plea for bargain-hunters to give the app a break.
It’s an embarrassing, if temporary, glitch for boss Eddie Wu, who is keen to showcase Qwen’s impressive agent-like capabilities.
Users simply need to say “help me buy” for the chatbot to order food, complete payment and other tasks without switching apps.
Rival AI-linked offerings are also vying for the attention of millions of Chinese consumers over the upcoming holiday period.
Tencent is giving away 1 billion yuan of cash in red envelopes via its Yuanbao chatbot; ByteDance has landed a coveted partnership with the Spring Festival Gala - China’s biggest televised event akin to the Super Bowl in the United States - to promote its popular Doubao app and deploy its Volcano Engine models and cloud computing services, according to the South China Morning Post.
The land grab for users follows a well-trodden path in China’s technology sector, where deep-pocketed giants compete to outspend one another for market share in grueling and expensive price wars. Just last year, for instance, Alibaba, Meituan and JD.com ramped up discounts and subsidies on their food delivery platforms, prompting regulators to step in.
But the difference with AI apps is that companies have yet to find ways to generate revenue, let alone sustainable earnings, once the dust settles. Convincing consumers to fork out subscriptions will be a long slog: a Tencent executive last year warned that “in China, in reality, it’s actually very hard to use the user-paid model” popular in the United States
And subscriptions alone may not be sufficient to cover rising costs; Sam Altman’s firm will soon experiment with sponsored content and advertising in its chatbot. China’s latest AI flex may be driven in part by a greed to be the new tech’s dominant player, but it masks deeper financial fears. — Reuters