Alibaba’s AI Strategy: Massive Ad Spending to Dominate a Crowded Market – Alibaba Gr Hldgs (NYSE:BABA), Amazon.com (NASDAQ:AMZN)

Chinese artificial intelligence (AI) companies, including tech giants Alibaba Holding Group BABA And ByteDanceare investing heavily in advertising to gain a foothold in the competitive AI market.

In the third quarter alone, these companies spent more than 500 million yuan ($70.2 million) on promotional campaigns for various AI applications, according to SCMP. reports.

Among the big spenders, Alibaba allocated nearly 200 million yuan to promote Quark, a cloud storage and online search platform with generative AI capabilities.

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Spending for its ChatGPT-like service, Tongyi Qianwen, was significantly lower at 4.5 million yuan. A spokesperson for Tongyi Qianwen disputed this figure, SCMP said.

Large marketing budgets have raised concerns in China about the sustainability of such high spending.

Chinese AI startup Moonshot AI, backed by Alibaba and Tencent Holdings TCEHYis among the biggest investors in advertising, with around 150 million yuan dedicated to promoting its chatbot.

The company’s substantial advertising budget reflects the increasingly crowded AI market, where hundreds of chatbots compete for users’ attention. However, a source close to Moonshot told SCMP that AppGrowing’s data on the company’s ad spending is exaggerated.

Yan Junjie, CEO of Shanghai-based AI company MiniMax, highlighted a fundamental difference in strategy between Chinese and American AI companies.

While U.S. companies rely on their product capabilities to attract users, Chinese companies are investing heavily in online marketing to differentiate their offerings.

Chinese tech giants Alibaba, Tencent and Baidu, Inc. BIDU spent $7 billion on AI-focused infrastructure and processors in the first half of this year, a significant increase from last year.

Despite increased spending, Chinese capital investment in AI lags behind U.S. companies like Alphabet Inc. GOOG GOOGLE, Amazon.Com Inc. AMZN, Meta Platforms Inc METAAnd Microsoft Corp. MSFTwhich spent $106 billion. Wedbush analyst Dan Ives projected $1 trillion of capital spending on AI by US tech giants, with Nvidia Corp. NVDA a key beneficiary.

Price action: BABA stock was trading down 2.93% at $96.31 at last check Wednesday.

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