Netease games, revitalize AI?

Image source: Generated by Unbounded AI tool

Source: Titanium Media

Text: Photon Planet

Author: Wu Kunyan; Editor: Wu Xianzhi

Unknowingly, NetEase has become one of the most popular Internet targets in the eyes of investors.

According to Wind data, Netease-S (9999.HK) recorded a 48% increase in 2023, surpassing JD.com-SW (9618.HK) to become the fourth Internet target market value in Hong Kong stocks. "Win numb" is not an exaggeration to describe NetEase.

As for Netease's performance in the latest quarter, it does not live up to market expectations. The financial report shows that NetEase’s revenue in the second quarter was 24 billion yuan, a year-on-year increase of 3.4%. Compared with the steady growth of overall revenue, what may excite the market is that the net profit from continuing operations attributable to the company’s shareholders under non-GAAP reached 9 billion yuan. Yuan, a year-on-year increase of 67%.

In addition to the data in this financial report, the most bright spot is the application of Netease AI in its multiple business lines. The financial report shows that in addition to self-developed games that have allowed AI to penetrate into the workflow, NetEase Cloud Music, NetEase Media, NetEase Youdao and other business lines have AI applications to varying degrees: NetEase Cloud Music launched AIGC-assisted creation led by NetEase Tianyin , NetEase Media has digital people dialogue with Musk to innovate the news scene, and NetEase Youdao has launched a large model in the field of education.

It’s just that the emergence of AI has not changed the status quo that NetEase has been a game company “cloaked in the skin of an Internet company” in the past few years. The game business has long accounted for more than 70% of revenue.

This may also be the main reason why NetEase can achieve good market performance-the game business provides it with strong certainty. What's more, in this quarter's financial report, the possibility of the mobile game "Naishuihan" that NetEase has placed high hopes on and the possibility of switching to "Eternal Tribulation" that breaks the paywall for free has not yet been shown.

Relying on the revenue and development of the game business to drive the overall business, NetEase's path is unique and difficult to replicate.

Game, AI experimental field

It is inevitable that there will be followers under the trend of AIGC and large-scale models, whether it is the large-scale Chat bot application that spread from Chat GPT, or a large number of Vincent graph companies that have emerged since Stable Diffusion, most of them are start-up companies Or the waist enterprises that have failed to form a consistent technological development path.

In contrast, leading companies with more mature technological development and stable business often have their own paradigms. They not only focus on embedding AI capabilities into existing businesses to help business development, but also promote the development of business to feed back the development of AI technology. Not small. For example, Dingding Slash, Volcano Engine, etc., and the same is true for Netease.

Netease's AI application can be traced back to 2017, when AlphaGo defeated Li Shishi and opened the first round of AI outlets. Netease founded the AI research institution Fuxi Lab, focusing on the implementation and development of AI in the game and pan-entertainment industries. In the same year, the NetEase Interactive Entertainment AI Lab was also established, gradually spreading the scope of AI applications from games to other businesses, and the AI development path with games as the "experimental field" has begun to emerge.

The so-called "experimental field" means that NetEase's AI technology will first try to implement in the game field, expand more possibilities of implementation while increasing the efficiency of the game business, and then export to other fields. For example, the AI painting platform "Danqingyue" jointly developed by NetEase Fuxi and Leihuo Art Center, and the early AR applications verified in games such as "Onmyoji" and "Decisive Battle in Ping'an Jing" have been expanded to marketing, cultural tourism and other scenarios.

In fact, video games, regarded as the "ninth art", are one of the most information-intensive categories in human society. They not only include art, music, film and television and other art forms and drive their development, but also Inseparable from AI, leading the evolution of cutting-edge technologies represented by AI.

It’s just that the traditional game AI is limited by the times, basically it is the integration of the rules formulated by the developers, and it fails to show strong intelligence and interaction capabilities. A typical example is the NPC in the RPG game that has a fixed dialogue with the player. Today, the combination of AI and games has already broken through the existing extension and entered more links of game production. This has been since domestic mainstream game manufacturers such as NetEase, Tencent, Mihayou, ByteDance, etc. have established their own games. It can be seen in AI Lab.

The difference between NetEase and other competitors is that the game business occupies an absolute majority of revenue. Not only does it have more scenarios and room for trial and error, but the game AI can also gain more investment in research and development funds.

Today, Netease game AI has gradually demonstrated its landing value on the way to multi-lane development. For example, technologies such as voice-driven mouth animation, video motion capture, and automatic frame insertion in the field of computer vision have been successfully implemented in "Fantasy Westward Journey 3D Edition" and many second-dimensional games under NetEase, and even exported in cooperation with non-NetEase games. Value, or the first domestic unmanned loader launched by Netease Fuxi in July this year.

Nvidia CEO Huang Renxun, who dominates the computing power dividend in the current large-scale model era, once mentioned in his speech "The Power of Vision" that at the beginning of Nvidia's founding, "the only purpose was to use technology to make video games possible." The Chinese Academy of Sciences also published major research According to the results, "Game technology is a hard-core technology that is 'delayed' by fun." Over the past 50 years, video games and cutting-edge technologies have always been in a relationship of mutual growth and mutual promotion.

Now Netease's performance just further proves the importance of games in the evolution of technology. However, unlike Nvidia, Nvidia's products are the underlying "infrastructure" of computing power, which can be applied everywhere, but Netease's AI capabilities and technologies need to face the problem of crossing scenarios.

The game becomes the umbrella

Since the game is the first scene for the application of AI technology, the landing itself is to serve the game content and match the requirements of the game content.

For example, the AI capability embedded in the mobile game "Naishuihan" released by Netease on June 30, whether it is AI-assisted face pinching, AI lyrics, or the "GPT experience" brought by intelligent NPC, its application purpose is for players to experience and The improvement of game quality is naturally oriented to the C-end in terms of product orientation.

Functions such as face pinching, lyric writing, and smart NPC are out of the game context. They are only unsurprising content generation functions in the era of large models, which can be presented after investing in underlying computing power and a certain period of training. In other words, the sparks of these AI capabilities are only "dazzling" on the premise of colliding with the game, because players are only pursuing a more immersive experience. As for the function itself, there is no obvious advantage over many players in the AI section.

A typical example is AR, which appeared a few years ago. Except for games, most of the practical scenarios are concentrated in the marketing field. The fact that users can obtain gamified experience in marketing just proves that although AI capabilities are verified by games, its The scene is also likely to be limited by the game.

More importantly, there is a certain distance between the embedding of AI capabilities and commercialization - many AI capabilities are not the core of the game content and do not require players to pay for the experience.

As for Netease’s 2023Q1 financial report, “Self-developed AI technology has been applied to the entire process of game industrialization, and AI technology can improve the work efficiency of key links by as much as 90%”, which is relatively a more B-side story. It's just that the application scenarios are also more restricted, and the front of the value output is more peers. Moreover, the core Vincent graph circuit in the game content workflow has not yet reached the height of industrialization, and a large number of open source high-quality models are also threatening the establishment of its business model.

In other words, NetEase's AI capabilities have taken root in game production, but in the face of serious business scenarios from the outside world, simply reusing its functions is obviously not enough. So how can the AI capabilities that have been implemented bridge the scene gap?

NetEase seems to be unable to give a clear answer to this, but on the basis of its own business, it forcibly expands new lanes for AI landing. This quarter's financial report mentioned that NetEase has built an "application-oriented" R&D system to promote the transformation of cutting-edge achievements such as AI large models into specific products and services, which also positively demonstrates NetEase's R&D investment orientation.

The unmanned loader mentioned above is the pilot product jointly developed by Fuxi and China Construction Eighth Bureau. This product attempts to gamify the engineering workflow through human-computer interaction, image generation and other capabilities. However, according to public information, it is expected that the product will take three years to actually land.

A former employee of NetEase said: "The game has become the umbrella of NetEase AI. Product orientation makes NetEase AI more likely to reproduce existing achievements in the game, but lacks the ability to innovate. Naturally, it is difficult to be competitive after leaving the game."

Outside of the game, it has yet to be implemented

In addition to the main task of the game, NetEase has no shortage of "branches" such as music and education, and AI naturally "reaches from here to there".

At the 2023 World Artificial Intelligence Conference (WAIC) on July 6, 2023, NetEase presented a variety of large models, covering content creation (music, painting), education, and newly expanded industries. Except for education, NetEase has already launched Youdao Dictionary Pen equipped with the relevant capabilities of the "Ziyue" large-scale model in the form of products, and other capabilities have not yet shown a clear path to commercialization.

Taking the content creation section as an example, Netease has opened to the public the application "Danqingyue" with the ability to carry the Wensheng graph model "Danqing". And support for multiple rounds of multi-modal corrections, etc.; and the AIGC music creation function "Netease Tianyin" that is open to Netease musicians in Netease Cloud Music.

None of the above products have been commercialized, but have taken the lead in the community field under Netease's consistent product and user path. Among them, Danqingyue only opens up the AI painting experience on WAIC, and the further platform product, the intelligent art platform, has not yet been launched; while the AIGC music creation function has set off a wave of AI creation in the NetEase cloud community, but the audience for the creation works is very small. Among NetEase Tianyin's works, only the most popular music has reached 999+ in terms of comments.

What's more worth mentioning is that, or affected by the strong "landing" demand, the large models released by NetEase so far are all vertical large models, and the capabilities and parameters of their bases are still in the state of black boxes. The progress in the field of AI large models can only be determined by the implementation of the application.

At present, NetEase has a large-scale model Ziyue family that shows signs of commercialization, and is also facing fierce competition from players such as Xunfei Xinghuo and Xiaodu in the track.

Ding Lei, CEO of Netease, once said that if there is a man-made aircraft carrier in the Hundred Models War, it is natural for someone to drive an aircraft carrier. Currently NetEase's top priority is to explore innovative applications of AI large models at the fastest speed.

And the application needs the underlying support after all, otherwise it is just a castle in the air. Since the evolution of the 100-model war, music, education, painting, office and other tracks have become increasingly crowded. Whoever can show the ability to turn AI from a toy into a tool earlier and start commercialization will be able to seize the lead at halftime. machine and mind. At present, it seems that NetEase is still far from this goal.

Of course, NetEase can also rely on the game to continue to iterate AI capabilities and feed back the game business, chasing the "Oasis" in "Ready Player One", the holy grail of the game industry. The market is looking forward to NetEase's answer whether the large model is for NetEase to start the next era of games or the next era of NetEase.