In 2024, the competitive logic of China’s AI industry has been altered by a major model enterprise, signaling a shift in the way AI products vie for market dominance. The sudden rise of Kimi, an AI product that became wildly popular, has provided an answer to the industry’s anxiety over creating hit products—by investing heavily in user growth through traffic acquisition. This approach has led to a temporary prosperity in the domestic large model market, but as the months pass, the sustainability of this strategy is being called into question.
The Kimi Phenomenon and the Shift in Competitive Logic
The transformation began with Kimi’s exponential growth in February. By March, Kimi’s traffic had surged to 12.61 million, marking a 321.58% increase from the previous month. Since then, Kimi’s traffic has consistently remained above 20 million. This surge has had a significant impact on the industry, offering a clear path to growth through traffic investment.
Previously, most AI products had been fleeting successes, with few achieving phenomenon status. The industry was fraught with anxiety over creating the next big hit. Kimi’s success, however, demonstrated a clear strategy for growth—investing in traffic to drive user numbers. The impact of this strategy was evident in the data. In February, only Kimi and ZhiPu QingYan saw an increase in traffic among the top 10 AI applications, while others experienced significant declines. By March, all top AI products had seen a traffic increase, with nine of them growing by over 40%.
The Tilted Playing Field: Big Tech’s Dominance
As the competition for traffic intensifies, the scales are tilting in favor of big tech companies. According to AI Product Rankings, in March, half of the top 10 AI applications were from startups, including Kimi, MiTa AI Search, ZhiPu QingYan, AiPPT, and GaoDing AI. However, by July, only two products from startups remained in the top 10, with the rest coming from internet giants like Baidu, Alibaba, ByteDance, and 360.
This shift is not surprising. Large tech companies have a natural user base and ample marketing budgets, giving them an edge in the user acquisition battle. The rise of Douyin DouBao is a prime example. DouBao began large-scale advertising in May and quickly rose to the top of the free app charts, spending an estimated 124 million yuan in June alone. DouBao’s success in mobile has put it in a dominant position, while its web traffic is rapidly closing in on Kimi’s.
The Problem with the Burn Money Strategy
The challenge with the burn money for growth strategy is that it may lead AI products away from their core value proposition. While it brings attention and user growth, it also pushes products into a competition based on traffic acquisition, a game that big tech companies are best suited to win. Moreover, AI products have limited network effects and primarily monetize through subscriptions. With the paid logic not fully established, the effectiveness of spending lavishly to acquire users remains questionable.
The North Star Metric: Payment Rate
In product development, there is a concept known as the North Star Metric, which is the most crucial indicator of a product’s success. From the PC internet to the mobile internet, this metric has evolved, but for AI products, the payment rate should be the North Star. It is a more accurate measure of a product’s value and sustainability than sheer user numbers.
Kimi’s focus on user growth has come at the cost of moving further away from this core metric. The company’s average customer acquisition cost has soared, reaching 30 yuan per user on Bilibili, nearly double what it was six months ago. This suggests that while the burn money strategy may bring short-term gains, it may not be sustainable in the long run.
Conclusion
The burn money for growth strategy in the AI product market is facing increasing scrutiny. As the competitive landscape shifts and big tech companies flex their muscles, the focus on user acquisition may overshadow the true value of AI products. For the industry to thrive, a return to focusing on the North Star Metric—payment rate—may be necessary to ensure long-term success and sustainability.
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