Asia Independent Research Conference
20 18 Paul Schulte Schulte Research
Schulte Research is an independent research service founded in 2014 by Paul Schulte who has 27 years’ experience as an analyst. It focuses on banks, bank credit, corporate solvency and emerging “FinTech”.
Schulte Research is published by IND-X Advisors Ltd., a Hong Kong-based investment advisory company, the origins of which can be traced back to 2003. IND-X is regulated by the Hong Kong SFC and is a registered investment advisor with the US SEC.
93 A new model of AI: The birth of the digital conglomerate: When more data is better.
Paul Schulte, MA, MALD [email protected] www.schulte-research.com (+852) 9705 0777
Gavin Liu, CFA – Senior Analyst
Representing the interests of the global hedge fund industry Artificial Intelligence Described on a Single Chart
2. Cognitive Services 40bn
Sensors Computing
3. Lifestyle/ Health Quantum Neural Physical Digital Networks: IoT Infra. AI Data Data Machine 4. Autonomous cars Learning 5bn 5. Robotics Mobile Devices 6. Advertising
Cloud
Source: Schulte Research Project Conclusions
Chinese Firms Conclusions
PRC firms are better at monetizing technology for mass use.
PRC has a long term, coherent plan for AI. The US has no plan.
Chinese are more willing to surrender data.
Alibaba and Ping An are much further into new territory than anyone else.
Integration of finance and lifestyle is welcomed and encouraged by PRC.
Source: Schulte Research PRC has a clear national policy of proliferating credit to individuals and SMEs. Project Conclusions
Reasons for China’s Success over US
US heavily entrenched incumbents & lobbying groups.
Regulators who were on the warpath.
Many of the PRC companies learned to “eat dirt”.
China succeeded because there was no “there there”.
Source: Schulte Research AI Financial Services Comparison: Alibaba way ahead. Ping An and Tencent also dominate
Company Payment Insurance Personal SME Credit Money Wealth Crowd- Currency Loans Loans Rating Market Mgmt funding Exchange Alibaba AliPay Ant Personal SME loans Zhima Yue’bao Ant ANTSDAQ AliPay (400mn) Zhong An loans - Ant – Ant Credit (CNY1.2tn) Financial, (51.8% ms) SME AliPay Service Tencent WePay Zhong An Weilidai Weilidai WeBank WeBank JD.com (300mn) (38.3% ms) Ping An Ping An Ping An Ping An Ping An Ping An Ping An Ping An Lufax Ping An Bank Insurance Bank Bank Insurance Asset Asset Bank Mgmt Mgmt Baidu Baidu Yes Yes Wallet (100mn) Amazon Electronic USD$3bn Damage SME loans Insurance (Amazon (UK) Lending) Microsoft MSFT Wallet There is a whole lot of Google Google Wallet, nothing going on here! Android Pay
Source: Schulte Research Apple Apply Pay (85mn, 450%YOY) Facebook Messenger Pay Chinese firms have implemented quicker and jettisoned quicker. China dropped duds & created financial empires. US firms stopped their efforts.
Company Duds Successful Replacements
Alibaba Lai Wang, Alibaba.com (HK) Ant Financial, AliPay, Taobao, Tmall, Alibaba Cloud, PAI 2.0, Zhima Credit, ANTSDAQ, Yue’bao, Youku, Weibo, etc. Tencent Pai Pai, E-commerce WePay, Weilidai, WeBank, JD.com, WeChat, Didi, Tencent Cloud, etc. Ping An Ping An Good Car Ping An Bank, Ping An Insurance, Ping An Asset Mgmt, Ping An Health, etc. Baidu O2O Wai Mai Baidu Wallet
Microsoft Microsoft Wallet Skype
Google Google Hangout Android Pay Duds with no Facebook Messenger Pay / replacement Apple Apple Pay /
Source: Schulte Research Amazon Amazon Lending / Amazon Insurance
*China had duds but morphed quickly and pivoted effectively AI Data Source Comparison. Alibaba may leapfrog all with PAI, Ding Talk, and Tmall Genie. This puts Alibaba in its own league with Tencent very close. Company Intentional Data Un-intentional Data IoT/Car Cognitive Service Cloud
Alibaba AliPay, Taobao, Tmall, Youku, Weibo, UCWeb, Cainiao ”Connected Car” with Platform for Ali Alibaba.com, Alibaba Logistics, Yahoo! China, SCMP, SAIC, AutoNavi, Ali Artificial Cloud Express, Yue’bao, Tmall, AliWangWang, LaiWang, PAI, Health, KFC Intelligence (PAI Alibaba Cloud (750mn) Ding Talk 2.0), Tmall Genie Tencent WeChat Pay, 3rd Party WeChat (938mn), QQ (700mn), Didi, Dianping review WeChat Voice/ Tencent Providers (JD.com, Didi, Qzone, WeChat Ecosystem, site Image, Tencent Cloud etc.) Gaming Video Ping An Ping An Bank, Ping An Ping An Health, Ping An Ping An Auto Owner, Facial recognition, Ping An Insurance, Ping An Asset Securities Wanjia Clinics Voice print Health Mgmt (350mn) Cloud Baidu Baidu Search, Baidu Baidu Search Food Delivery Service, Little Fish Baidu Wallet Project Apollo Cloud Amazon E-commerce (B2C, C2C) Shopping search Echo, Kindle, Whole Alexa, Rekognition, AWS Foods, Amazon Books, Polly, Lex, Amazon Logistics Video Google Google Play Store, Google Search, Android OS, G- Android OS, Waymo Health, Translation, Google Google Search mail, Maps, Chrome, Snapchat Google Assistant, Cloud (166mn MAU), Youtube, Google Face, Deep Waymo Mind Apple iTunes (800mn), Apple iOS, Safari iPhone (1bn), iPad, Siri, Face iCloud Music, Apple Pay (85mn) iPod, Mac, Apple Watch Recognition
Source: Schulte Research Microsoft Xbox, Microsoft Wallet LinkedIn, Office, Skype, Bing, IE Kinect, Microsoft Zo, Computer Azure (small) Surface, Windows vision/ Speech/ Phone Language API Facebook Messenger Pay Facebook, Facebook Messenger Oculus, Project Titan Deep face, Deep / (1.96bn), Whatsapp (1.3bn) text, Translation AI Cognitive Services Comparison: Microsoft Winner. There is a “me too” attitude. Microsoft has made a wide and deep mark. But, Alibaba PAI is deeper and broader than anyone else. Natural Language Company Image Recognition Facial Recognition Voice Video Understanding Alibaba Document recognition, Identity Customer service Real-time translation Video image search+, PAI authentication, Alipay AI, voice->text services, PAI analysis, service, etc., PAI broadcast service, PAI
Tencent Fashion trend analysis Identity WeChat Translation Tencent authentication Voice/Image Video
Baidu xPerception, Pixlab API, Baidu Facial Voice Search, Translation, Speech / WICG Shape Detection Recognition (99.7% Text-Speech Recog., Kitt.AI, API accuracy) Converter, Deep RavenTech Voice (97% accu.) Amazon Amazon Rekognition Emotion recog., Face Alexa, Lex Alexa, Echo, Polly Amazon Comparison Video
Microsoft Image understanding, Face API, Emotion, Speech Translation, Text Video Celebrities/Landmark Verification, Verification, Text- Analytics, LUIS analysis, recog. Detection Speech Converter Video Indexer Google Image searching Google Face Google assistant Translation AI, Text YouTube Analytics
Source: Schulte Research Apple Classification/ Facial Rec. Siri Siri / Detection/ Checking Facebook Text recognition, Deep Face Oculus VR Voice Translation, Deep Text / translation Recog. AI Lifestyle Comparison: Tencent + Alibaba Winner. Microsoft + Baidu falling behind.
Company Media Food Travel Entertainment Interaction Search Education Health
Alibaba Live media, KFC Air/train Audio/video Online Personalized Media Utilities news China, tickets, solutions, video shopping search, direct education payment, production, Koubei, hotel game services, e- support marketing services Hospital- media Ele.me booking commerce, Youku, service, big patient comm., interaction, AGTech data analytics smart diagnosis etc. Tencent QQ music, Meituan LY.com E-commerce, video WeChat WeChat Koo Learn, WeChat Joox, Tencent Dianping games Search, Sogou Ke.qq Intelligent Video/ News Hospital Baidu Book recomm. / Ctrip / / Search engine Baidu Health Search (76% market Education share), (Jiaoyu) personalized search, data marketing Amazon Books, music, Whole / TV streaming, / Search Amazon / TV streaming Foods, Amazon Studio recomm. Inspire Amazon Fresh Microsoft / / / X-box/gaming Skype, Bing MSFT MSFT Health LinkedIn Education Google Google Videos / Google YouTube Snapchat, Search engine, Google for Google Health, Flights Gmail, personalized Education Google Fit Google+ search, data marketing ITunes / / Apps, App Store, Messages / / Health apps Source: Schulte Research Apple Game development kits Facebook Facebook / / Facebook games Facebook, Internal Search / / newsfeed Whatsapp, Function Instagram AI Cloud Comparison: Amazon Big Winner. Alibaba Leader in Asia.
Company Market Share Comments (in respective markets)
Alibaba 41% Leader in Asia, >100 newly developed AI services Services in storage, networking, healthcare, logistics, lifestyle, media, business enhancements, and etc. Tencent 7% #3 in Chinese Market, services in public/private storage for personal/business use
Baidu 1% Small cloud service
Amazon 47% Amazon AWS: Global & US leader
Microsoft 10% Fastest Growth Rate, 97% YOY Azure & Office 365
Google 4% Fast growing, 45 teraflops of data (45 trillion bytes/second) Services include AI APIs’, storage, search history, e-mail, etc. 71,000 searches/second Source: Schulte Research New quantum computer
Apple 1% Small cloud service, primarily strong in private data collection Services in location, storage, and security Advertisement: Facebook is leading, other data rich firms have the potential to expand the revenue source
Advertisement revenue as % of total revenue 100.0% 97.0% 1 trick ponies? 91.4% 89.0% 90.0%
80.0%
70.0%
60.0%
55.0 % 50.0%
40.0%
30.0%
20.0% 17.7%
Source: Schulte Research 10.0% 7.1% 2.2% 0.0% Facebook Baidu Google Alibaba Tencent Microsoft Amazon Alibaba AI: a truly common man’s bible – access to virtually any and all data dumps of all of China. Artificial Intelligence/ AI PAI 2.0 Banking AI A. Financial Services Services N. Government Government Services M. Environment B. E-Commerce
L. Health C. Cyber-Security
K. Energy D. Manufacturing
E. Online-To-Offline J. Audio/Video AI Source: Schulte Research Business AI Lifestyle Services F. Logistics I. Video Games H. Media Services G. Websites/Apps Ping An has made greater strides into becoming an autonomous financial ecosystem than any other company
Artificial Intelligence
Healthcare
Finance Data Analytics Data
Insurance Health Management
Source: Schulte Research Golden Butler
Facial Recognition Zhong An: only 3 years old, the largest pure online, cloud-based insurance company globally.
Artificial Intelligence
Enterprise Solution
Lifestyle Dynamic Pricing Dynamic
Return Insurance
Agent Source: Schulte Research Management
Credit Rating Amazon: online bookstore for 3 years to #1 global player in almost everything, including Cloud, Enviable execution + impressive global ambition.
Artificial Intelligence
WholeFoods Entertainment
Books
Everything..
Source: Schulte Research NLP
Life style Google: from #16 in search engine, Google has used AI to become advertising behemoth. But, it is not on the radar screen in finance.
Artificial Intelligence
Services Search
Source: Schulte Research Translation
Analytics Facebook: the greatest 1 trick pony ever. They control the social network + people think this is important – but for it’s own sake? One of the worst scores.
Artificial Intelligence
FAIR labs
Lifestyle
Text AI Text IOT
Facebook Sensors
Source: Schulte Research Deep Face Market Cap: Tech companies are a gathering force in market cap. They dominate capital markets now. Banks can’t hold a candle to tech spending Market Cap (US$ bn) 900
800
700
600 Tech avg.=$543 bn
500
400
300
200 Bank avg.=$73 bn 100
Source: Schulte Research 0 Free Cash Flow: Cash flows from operations – investment in operating capital (mostly fixed assets)
Tech companies blow away banks in cash flow (‘different’ numbers but you get the point!) Free Cash Flow (USD bn) (2016) 60 53
50 47
40
31 30 26
20
12 10 9 9 9 9 10 7 3 2 0 0 -2 -3 Source: Bloomberg, Citi, HSBC -10
Note: bank numbers are net income Investment Cash Flow (net spending in PP&E, Capex, M&A)
US$300bn in “conduct costs” for banks is that much more that can’t be used for investment. Plus, current R/D spending is woefully under invested. Investment Cash Flow (USD bn) (2016) 50
40
30
20
10
Source: Schulte Research, Bloomberg 0 Microsoft Apple BofA Alphabet Lloyds RBS All US Deutsche Facebook Alibaba Tencent BNP Amazon Baidu (fines) (fines) (fines) Retail (fines) (fines) Banking Tech Invest. Asia Independent Research Conference
20 18