Alibaba Spins Off "Unity" AI App Team from Cloud Unit

On December 18, a significant shift took place in Alibaba’s organizational structure as its AI application, Tongyi, was officially separated from Alibaba CloudThis move has now integrated Tongyi into Alibaba's Intelligent Information Group, marking a pivotal moment in the company's strategy concerning AI technologiesSources close to the matter have confirmed that the product managers focusing on the consumer side (To C) of Tongyi, along with relevant engineering teams, are now under the umbrella of the Intelligent Information Group, while the Tongyi Lab will remain part of Alibaba CloudConsequently, the teams responsible for the Tongyi PC and App will now operate alongside Alibaba’s smart search product, Quark, at an equal managerial level.

This restructuring indicates the likely separation of technical foundations and product application teams, which is essential as Alibaba’s management recognizes the growing need for distinct divisions of labor in AI operations

Wu Jia, president of the Intelligent Information Group, is expected to take on increased responsibilities for AI operations aimed at consumers within Alibaba.

The timing of this reorganization appears not to be coincidentalWu Jia is a noteworthy figure among Alibaba's "youthful management team," a wave of post-1985 executives gaining attention for their innovative approachesIn December 2023, during a round of organizational changes announced by Alibaba Group’s CEO Wu Yongming, Wu Jia was tasked with overseeing both the Taobao and Tmall user platform divisions alongside the Alibaba Mom business unitFollowing further changes to Taobao, which led to the formation of a unified Alibaba eCommerce Group, Wu Jia stepped back from Taobao responsibilities, signaling a focused shift back to the Intelligent Information GroupSuch movements stirred speculation that he would delve deeper into exploring Alibaba’s AI initiatives, particularly aimed at consumer engagement.

Yet, this transformation doesn't come without its challenges

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Tongyi’s development within the To C realm is under significant strainThe heated competitive landscape for AI-generated content (AIGC) applications became particularly apparent in October 2023, when the Tongyi Qianwen App was launched across major mobile app marketplacesNotably, by May of the same year, it had been rebranded simply as the Tongyi AppAccording to QuestMobile's report, as of June, Tongyi’s active user metrics—measured by Daily Active Users (DAU) to Monthly Active Users (MAU)—stood at 14.3%, with users averaging 4.3 days of usage per monthThese figures positioned Tongyi fourth among peers, lagging behind apps like Doubao and Wenxin YiyanAlarmingly, the same report highlighted a monthly uninstall rate of 62% for Tongyi, nearly double that of Wenxin Yiyan.

In a broader sense, Alibaba Cloud’s strategic inclination towards business-to-business (B2B) models amplifies the challenge of effectively positioning AI consumer applications in what can be referred to as the “big model era” of AI

This endeavor is not merely a concern for Alibaba but a significant hurdle facing the entire industry, wherein user engagement and retention are critical for the viability of consumer-facing applications.

Industry analysts, like Zhang Shule, contend that the decision to separate Tongyi from Alibaba Cloud's traditional framework is rooted in the need for specializationWhile both technical foundations and product applications are vital, their distinct functions—one focusing on deep technology development and the other on market outreach—enable a more rigorous testing of technologies against market realitiesThis bifurcation allows for better adaptation of technical frameworks in response to consumer feedback, which is pivotal for transitioning innovative products from concept to practical application.

Wu Jia’s leadership of the To C division for Tongyi seems informed by his successful experience in incubating Quark, which Alibaba highlighted as one of its four strategic innovation ventures in November 2023. The Quark app has gained substantial traction among younger demographics, with over 50% of its users being under 25. This demographic insight is vital for developing features that resonate with younger users, contributing to a sharp rise in Quark’s user base.

However, regaining a growth trajectory for Tongyi amidst fierce competition in the AIGC app sector is anything but straightforward

Reports from the past year indicate that over 40% of AIGC applications have experienced a decline in trafficAmong applications that achieved monthly compound growth—44 in total—only 12 reported growth rates exceeding 50%, while a significant portion of others struggled to maintain relevanceSuch imbalances signal a core issue within the market: there exists a stark disconnect between user needs and the functionalities offered by available applications.

As Zhang elaborates, the overarching difficulty faced by AI applications directed at consumers is their tendency to become mere novelty items rather than useful toolsWhile capable of assisting with certain tasks, they often devolve into modified iterations of popular memes or trends, ultimately rendering them less effective for practical use in everyday lifeThis misalignment between user expectations and the capabilities of AIGC apps continues to hinder progress in the sector, emphasizing the need for deeper insights into consumer demands and more innovative approaches in product development.