Takeaways from Alibaba Computing Conference 2017 in Shenzhen Part 1

April 5, 2017

The Fung Global Retail & Technology team attended the Alibaba Computing Conference 2017 in Shenzhen. The event featured close to 100 speakers, including senior management from Alibaba and its strategic partners. In this first of a two-part report, we outline our key takeaways from the two-day event. 1) HCI technology: Alibaba is at the forefront of human-computer interaction (HCI) business products, in our view. The AI-powered HCI applications are able to deal with high-volume customer requests and can facilitate business decision making. Examples include AliMe and Dianxiaomi, which was launched to help sellers automate customer service on Taobao and Tmall. 2) Health industry: Technological innovation is needed to solve the medical resource imbalance in the Chinese healthcare industry. We believe the industry will benefit from the technology products generated by the partnership between AliCloud, the cloud computing arm of Alibaba Group, and Intel on one of Asia’s leading cloud platforms focusing on precision medicine. 3) Online video market: The online video market in China has been impacted by the shift from PC to mobile and the increasing willingness of users to pay for content. Alibaba Cloud is supporting the technological transformation in the online video industry and Alibaba-owned Youku Tudou is among the leaders.

Alibaba Computing Conference 2017 We attended the Alibaba Computing Conference 2017 in Shenzhen, which featured close to 100 speakers, including senior management from Alibaba and its strategic partners. Topics covered at the conference included the applications of artificial intelligence (AI) and human-computer interaction (HCI) technologies, the ecosystem of Alibaba Cloud (AliCloud) and trends in areas such as the sharing economy and online video. In this first of a two-part report, we cover: 1) HCI and its business applications; 2) technology innovations in the health industry; and 3) recent trends in the online video industry.

April 5, 2017

Technological Breakthroughs in HCI Alibaba has made several breakthroughs in the field of human-computer interaction (HCI) technology. This year’s event featured a real-time transcript system which displayed the text of the various speeches on screen, showcasing the capacity of Alibaba’s automatic speech recognition (ASR) technology. The ASR technology uses an algorithm that balances speed and accuracy. Its mature text to speech (TTS) technology can also produce voices that are customized to different contexts. The conference featured TTS demos with sample voices that are used for news reporting and storytelling to children. Dr. Min Chu, Director of Data Application & Service, Alibaba Cloud Computing, spoke about the progress Alibaba has achieved in the past two years, thanks to the group’s capabilities in machine learning and its computing capacity, which would have taken more than 20 years using traditional research infrastructure.

The Human-Computer Interaction (HCI) Ecosystem Dr. Chu introduced the HCI technology and provided an overview of its ecosystem: 1. Portals: • Devices connected by YunOS (the operating system developed by AliCloud): Cellphones, automobiles, online TV, smart wearables • Apps: Alipay, UCWeb, Autonavi 2. Core technology and content: Automatic speech recognition (ASR), natural language understanding (NLU), dialogue management (DM), natural language generation (NLG) and text to speech (TTS). 3. Infrastructure: Deep learning, computing capacity

Figure 1. Basic Technical Flow of HCI

ASR NLU

Human DM

TTS NLG

Source: Alibaba/Fung Global Retail & Technology

April 5, 2017

Various Business Applications of HCI The HCI technology is embedded in product offerings within the Alibaba ecosystem. The AI-powered applications can deal with high-volume customer requests and facilitate business decision making. Questions about delivery and inventory status that are challenging for human customer service can be answered in seconds by big data, and with higher accuracy.

1) Automatic Customer Service: AliMe AliMe is an AI-customer service platform embedded in Taobao Mobile. The app was launched in April 2016 and to date, has approximately 3 million daily active users (DAU). AliMe supports four primary functions: 1. Basic Q&A: The user interface lists out frequently-asked questions. Users can read the answers by selecting the questions they are interested in. 2. Transaction information enquiries: Customers can enquire about information on a specific transaction in their Taobao account by typing or speaking their questions to the Chatbot. Information that can be provided by the chatbot includes an item’s location, delivery status and refund progress, all powered by Alibaba’s big data technology. 3. Shopping guides: The chatbot can help customers find the products they want through a series of HCI actions. Users can input by text, voice or a photo description of a specific product, and the system will return a list of recommendations. Users can narrow the range of the result through more specific filters, such as brand, color, gender, etc. During a demo session at the conference, the speaker demonstrated how customers can find an exact product within 30 seconds of talking to the chatbot. 4. Daily life assistance: Using the app, users can receive information on weather, traffic, book tickets, as well as assistance with other types of requests. We believe this function has the potential to increase user engagement.

Figure 2. AliMe User Interface

Source: alixiaomi.com

April 5, 2017

2) AI for Business: Dianxiaomi Dianxiaomi is the first AI product that Alibaba launched for business users on Taobao and Tmall. A free trial version was open for application during the conference, and the official version will be launched in June 2017. Dianxiaomi is designed to help sellers on Taobao automate their services, increase the conversion rate, reduce costs and handle high-volume sales activity such as the “Singles’ Day Sale.” The app is based on machine-learning technology that can automatically deal with customer requests. The app is able to cover 70% of the request volume with over 90% accuracy.

Figure 3. Dianxiaomi User Interface

Source: Fung Global Retail & Technology

3) Applications of AI in the Healthcare Industry Alibaba Cloud ET supports innovation in the healthcare industry, largely powered by a series of partnership projects with Intel. The healthcare industry in China is driving increasing demand for technological innovation to deal with the problems caused by the aging population and the supply-demand imbalance in the allocation of medical resources. Together with Intel and BFI (Beijing Genomics Institute), the largest genomics research center in the world, AliCloud launched a precision healthcare platform which contains over 170 applications and 170TB of gene data, high-accuracy ultrasound robots and an intelligent medical lab in Zhejiang province.

Figure 4. Eight New Technological Innovations in the Medical Industry

AI 3D Printing

Remote Medicine New Gene test

Medical Robots IoT

VR Digital Supply Chain

Source: PwC 2017 Health Industry Trend Report

April 5, 2017

Online Video Below, we summarize the key points on current trends and the outlook for China’s online video market that were shared at the conference. • The mobile video market has become a major market in China. The penetration rate of mobile video has increased to 92% in the past four years from 57% in 2013. With the rapid expansion of the online video market, online video advertising is more important than ever for the marketing and advertising industry. China’s online video advertising industry is estimated to reach ¥68.3 billion by 2019, from ¥35.5 billion currently, of which mobile video advertising makes up over 80%. • Furthermore, users’ willingness to pay for content and services has become stronger than ever. The number of paying users on online video platforms doubled to 6.1 million in 2016 from 2.9 million in 2015, and is projected to reach 100 million in 2019, according to analysis. The revenue from paid content and services is also projected to reach ¥15.1 billion in 2017 and ¥23.4 billion in 2019. • The online video market is dominated by several leading apps. In January 2017, the top three online video apps had over 100 million monthly active users (MAU): iQIY with 244.6 million (MAU), Tencent Video 2 with 231.2 million and Alibaba-owned Youku Tudou with 152.9 million MAU.

Conclusion We are convinced that Alibaba is at the forefront of the development of HCI technology and its business applications. However, it could take months or years for some of the more advanced HCI technologies that were demonstrated at the conference to mature and reach the mass market, due to the relatively high development costs and sophisticated hardware which they require.

April 5, 2017

Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: 917.655.6790 Hong Kong: 852.6119.1779 China: 86.186.1420.3016 [email protected]

Esme Pau Analyst

Zane Yang Research Assistant

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