As the mid-term season draws to a close, the performance of the AI sector is gradually becoming clear. In the context of high investment in generative AI technology and unstable business models, as well as downstream customer spending constraints, AI companies that can maintain stable profitability or even achieve growth are particularly precious.
Bairong Cloud Creation is such a rare AI company. Its half-year financial report data shows that through the strong performance of its AI main business, the company not only achieved an adjusted net profit of 197 million yuan, but also achieved a net profit margin of 15%, successfully joining the ranks of a few AI technology companies that have maintained profitability. Particularly noteworthy is Bairong Cloud Creation's sustained high gross margin, which reached 73% in the first half of the year, a particularly rare level of gross margin.
The reason why Bairong Cloud Creation is able to maintain a high gross margin and achieve year-on-year growth in net profit is mainly due to its well-established and mature AI business synergy operation model: the company's two core businesses, Model-as-a-Service (MaaS) and Business-as-a-Service (BaaS), are developing in synergy. In particular, the BaaS business, as the company's second growth curve, has risen with the help of generative AI technology, achieving a revenue of 900 million yuan in the reporting period, an increase of 11% compared to the previous year.
I. Why has generative AI become the core engine for profit growth?
Why has generative AI become the core of Bairong Cloud Creation's profit growth? There are two main reasons:
The first reason is a mature and efficient business model, which brings stable growth momentum to the revenue side.
Bairong Cloud Creation's BaaS business uses generative AI technology to provide one-stop services for financial institutions and non-financial institutions. This business accurately matches and filters users for segmentation, and uses AI intelligent voice robots, SMS services, and manual methods to reach users, helping commercial institutions achieve efficient new customer marketing, customer revitalization, and intelligent operation.
In the exploration of AI business models, there are mainly two landing scenarios: B-side and C-side. Although the threshold for C-side scenarios is lower and commercialization may seem easier, in reality, due to the influx of a large number of players and homogeneous competition, the commercialization effectiveness of the C-side is not satisfactory. Therefore, Bairong Cloud Creation has chosen to target the B-side of the AI business, which has greater potential commercial value compared to the C-side.
But building a stable and sustainable profit model is extremely challenging. B-side applications often face limited room for error and high performance requirements, so they are often willing to purchase services only after seeing results, which makes the entry threshold for B-side applications very high.
So how does Baorong Cloud Create do it?
In the BaaS field in China, most companies prefer to charge for actual revenue generated. However, Baorong Cloud Create has abandoned this billing method and instead adopts a strategy of only charging fees when it truly helps customers increase their income. Unlike other robot suppliers who charge based on call duration or other usage metrics, this direct binding of service effectiveness and revenue model provides customers with a more secure and efficient service choice. With its courage to guarantee performance results and significant achievements in actual actions, Baorong Cloud Create has achieved revenue growth far exceeding the industry average, laying the foundation for profit growth.
Secondly, the high investment period has passed, relieving pressure on the profit side.
For AI companies, the exploration of generative AI technology is both full of opportunities and extremely challenging. The initial development and application of new technologies not only come with high costs, but also immense risks. Once the decision is made to invest, the enterprise embarks on an irreversible journey and is difficult to easily withdraw or adjust its direction. At the same time, high investment often does not directly translate into significant profit growth in the short term, thereby bringing long-term financial and funding pressure to the company.
Compared to many companies that hastily joined the big model competition after last year's ChatGPT craze, Baorong Cloud Create's BaaS business has already taken a step ahead. Its development process can be traced back to three years ago, so it has already crossed the initial stage of the industry's frenzy and high investment, and entered a more stable and rational development phase.
In addition, Baorong Cloud Create did not blindly pursue high-concept and large quantities of big models, but based on its own actual situation and market demand, it early on built large models and used mixed expert model technology (MoE) to develop a series of lightweight models for specific fields. By flexibly combining expert models from different fields, Baorong Cloud Create ensures high performance of services while effectively controlling costs and improving overall cost efficiency.
Nowadays, with the gradual passing of the high investment period, generative AI has become the core engine of Baorong Cloud Create's profit growth. Its efficient business model combined with forward-looking strategic layout has brought continued and stable revenue growth and improved profitability to the company.
Second, cross the critical turning point of the J curve.
However, it is worth noting that if we compare the financial statements within the industry, we can see that many companies claim that "revenue from generative AI is increasing". However, there are significant differences in performance among different companies. Some companies adopt a continuous high expenditure strategy, trying to quickly expand market share through "burning money", which is essentially a high-risk "overdraft" behavior that may lead to irrational market prosperity. In contrast, companies such as Bai Rong Yun Chuang have already steadily crossed the key turning point of the J curve growth model, demonstrating a positive cycle and significant economies of scale.
About the J curve theory, it is necessary for us to briefly review: The profitability of the AI industry naturally follows the typical J curve growth trajectory due to its technological advancement, high R&D costs, and the gradual improvement in market acceptance. This process includes the introduction period, the growth period, the maturity period, and the possible decline period for specific industries or products. In the introduction period, AI companies face the dual challenges of technical complexity and market uncertainty and need to invest a large amount of funds and resources in technology research and development, team building, and market expansion. This stage is often accompanied by significant financial pressure because income growth often lags behind cost spending, leading to a decline in profits. However, once AI technology gains wide market recognition and achieves profitable scalability in practical applications, the company crosses the turning point and enters the growth period. In this stage, its income and profits will increase rapidly, opening a new chapter of high-speed growth.
As early as 2022, Bai Rong Yun Chuang had crossed the breakeven point of net income and started a trajectory of profit growth. In the first half of 2024, against the backdrop of adverse downstream demand, Bai Rong Yun Chuang's generative AI business still demonstrated strong resilience, offsetting the impact of unfavorable factors, which is also a side proof.
According to the performance report, in the first half of the year, Bai Rong Yun Chuang's BaaS financial industry cloud revenue reached 0.589 billion yuan, with a year-on-year growth rate of up to 20%. In the insurance industry cloud field, Bai Rong Yun Chuang's new/continuation premium scale reached 1.9 billion yuan and 970 million yuan respectively, with a year-on-year increase of 103% and 47%. This series of data indicates that Bai Rong Yun Chuang's generative AI revenue is rapidly expanding.
Bai Rong Yun Chuang has not only achieved a positive cycle of financial models and economies of scale but also built a virtuous cycle of research and growth as the technological flywheel effect emerges. With the continuous expansion of the scope of technological applications, the company can gather a larger training data set, which plays an important catalytic role in the deep optimization of AI models. The continuous optimization of technology and the surge in data volume complement each other, driving the accelerated rotation of the company's technical model flywheel.
In the first half of this year, Bai Rong Yun Chuang made significant progress in natural language processing (NLP) technology, upgrading traditional NLP technology to more advanced active large-scale model technology. This upgrade, through the integration of model quantization, distillation, and separated inference architecture technology, enhances the intelligent voice interaction chain, providing users with more efficient and accurate service experience.
Bairong Cloud Creation has also introduced Retrieval-Augmented Generation (RAG) technology, further enhancing the accuracy and reliability of large models. RAG technology enables the model to have a deeper understanding of the context and effectively integrates the retrieved information into text generation to meet practical needs. In the RGB benchmark tests conducted by third-party evaluation organizations, Bairong Cloud Creation's large model demonstrated outstanding performance in multiple key capabilities, with an overall accuracy slightly surpassing ChatGPT3.5, proving the company's professional strength and leading position in the field of AI technology.
Intelligent Speech Robot Voice GPT has also achieved significant technological breakthroughs. Based on the same-source technology of ChatGPT, Voice GPT has reduced its response time to less than 500 milliseconds and introduced emotion recognition and emotion voice output capabilities, improving semantic understanding accuracy to over 97%. These upgrades have enabled Voice GPT to play a key role in intelligent customer service, credit card and financial marketing, customer callbacks, etc., and have improved its daily AI outbound call capability to 50 million times, greatly improving service efficiency and customer satisfaction.
By abandoning the burn money strategy and cultivating a dual positive feedback loop of finance and technology, Bairong Cloud Creation has built a solid foundation for long-term and sustainable growth, avoiding the 'bubble'.
3. Prospects for the Future: Enormous Potential in the Vertical Scene Intelligent Service Market
Looking ahead, with the rise of the millennial and Gen X generations, customers' reliance on digital tools is increasing, leading to fundamental changes in investment habits, interaction modes, and service demands. China's wealth management industry is undergoing unprecedented transformation. Leveraging generative AI technology and its unique business model and technological advantages, Bairong Cloud Creation solves pain points for customers and provides efficient vertical scene intelligent services.
In the first half of 2024, Bairong Cloud Creation continuously expanded the application scope of its BaaS business model and successfully empowered customers in multiple fields such as banking, small and micro enterprise operations, and wealth management. In the banking field, Bairong Cloud Creation's Green Finance Solution, jointly created with Hua Xia Bank, was selected as an excellent case by the Ministry of Industry and Information Technology, fully demonstrating its leading position in the green finance field. At the same time, in the wealth management business, Bairong Cloud Creation effectively activated the potential of bank wealth management business by providing intelligent customer operation solutions for multiple banks, achieving rapid growth in customer asset size.
Through a series of successful case studies, Bairong Cloud Creation's strength in the field of intelligent services has been fully validated. Among them, the author noted that Bairong Cloud Creation provided an intelligent wealth management solution for a joint-stock bank, effectively activating the long-tail customer group that has been overlooked by banks in the medium and long term. For customers with asset management scale (AUM) mostly below 0.01 million yuan, Bairong Cloud Creation helped the bank change the traditional management strategy for these customers by building an efficient intelligent customer operation system based on 'one triangle, one chain, one cycle'. Combining personalized marketing scripts with optimized AI outbound call technology significantly increased product agreement intention rate from 4% to 10%.
In just a few months, this system helped the bank increase the number of customers with AUM of 0.01 million yuan and above to 0.026 million households, exceeding the control group by 0.019 million households, realizing in-depth exploration and value enhancement of existing customers, and opening up new growth points in the long-tail market of bank wealth management business.
The wealth management industry is currently facing fierce competition and opportunities in the era, so it is urgently needed to upgrade and transform itself with intelligent services. According to data from the National Bureau of Statistics and authoritative institutions such as Goldman Sachs, China's residents' wealth and income continue to grow, and the size of the middle-income group continues to expand, providing a broad development space for the wealth management industry. It is estimated that by 2025, the total investment assets of Chinese residents will reach 50 trillion US dollars and maintain a double-digit growth rate. This trend has prompted the wealth management industry in China to accelerate its digital transformation to meet the growing digital needs of customers.
The management of BaiRong Yunchuang is also confident about the future market space of BaaS business. The management predicts that in the next few years, in the credit scenario, the market size of online and digitalization is expected to grow from 17 trillion to 45 trillion, with a compound growth rate of 13%. Its market space is considered to be ten times larger than the credit scenario, and the online scale is expected to reach 130 trillion in 2022, and is expected to reach 400 trillion by 2030.
Facing the booming trillion-dollar market, can BaiRong Yunchuang firmly grasp this opportunity with its generative AI technology advantages? We will wait and see.