The 100 billion office software giant breathed a sigh of relief.
On February 28, Kingsoft Office released a performance report, with a net profit of 1.3 billion yuan in 2023, a year-on-year increase of 18%.
In the past four weeks, the company's share price has risen by 22%, and its market value has rebounded by more than 20 billion yuan.
In the second half of 2023, the company's share price will be cut in half, and its market value will evaporate by 100 billion. Under pressure, the current CEO Zhang Qingyuan overhauled the business, increased AI, adjusted the membership system, and closed third-party advertising.
Under the three-board axe, the situation warmed up.
Holding the WPS that workers love and hate, it has about 600 million monthly active users, and the largest office software platform in China is taking advantage of the trend.
Reroute
Zhang Qingyuan's first knife slashed at the advertising business.
At the end of December last year, Kingsoft Office announced that the domestic personal version of WPS Office would officially close third-party commercial advertising.
It was not easy to make this decision.
According to Zhang Qingyuan, in 2023, advertising will contribute 100 million in revenue. "This 100 million is completely gone. ”
This business once accounted for 50% of Jinshan's office income. In the early years, as soon as users turned on WPS, they could see pop-up shopping ads, and they were so annoyed that they gave them the nickname "Shopping Office".
Zhang Qingyuan said that in order to survive, he could only do it while being scolded. In order to get rid of this title, in recent years, he has been reducing advertising.
Give up the advertising sector with fast money and low threshold, remove the "carrion", and grow new meat.
Zhang Qingyuan hopes to find the next source of profit and expects users to pay for AI.
In response to the diversified needs of individual users, in 2023, Kingsoft Office will open up the application functions between the personal version and the enterprise version, upgrade the membership rights system, and iterate value-added functions and services.
In July of the same year, the intelligent office assistant WPS AI was released.
As a ChatGPT-like application in the office track, it is connected to WPS text, presentation, **pdf, Kingsoft documents and other products to solve users' office problems in content generation, content understanding, instruction operation, etc.
WPS AI went fast and quickly launched the public beta, paving the way for subsequent WPS AI price increases.
At present, WPS's individual user payment rate is less than 6%, which is still a huge gap compared to the 24% payment rate of its rival Microsoft.
Microsoft previously announced that Office 365 Copilot will be available for an additional $30 per user-month service fee on top of what most enterprise customers already pay.
As of the end of September 2023, the number of monthly active devices for Kingsoft's main products was 58.9 billion, if you can use AI to increase the payment rate, you will earn more profits.
Under a series of actions, in 2023, Kingsoft's office advertising business revenue will be about 28.8 billion yuan, a year-on-year decrease of about 6%.
At the same time, due to "optimizing the user experience of all products", the personal office service subscription business grew steadily, with a revenue of about 26500 million yuan, a year-on-year increase of about 294%。
Align with Microsoft
47-year-old Zhang Qingyuan, a programmer, graduated from East China Normal University, and has worked in Kingsoft for more than 20 years.
Four years ago, he was promoted to general manager and took over the office of Kingsoft.
Zhang Qingyuan has a "cleanliness habit" for products and pays attention to details. At one or two o'clock in the morning, he will often start a discussion in a certain business ** to talk about how to improve the core functions of the product.
Over the years that he has led the iteration of WPS, Kingsoft Office has faced competition from Microsoft all the time.
In 2023, Zhang Qingyuan will go out for a roadshow and is frequently asked two key questions: first, how does Kingsoft compete with Microsoft; The second is how to look at the competitive landscape of domestic first-class documents in the AI era.
Zhang Qingyuan **Jinshan Office.
The idea he gave for answering the question was to align with Microsoft.
WPS AI anchors three strategic directions: AIGC (content creation), Copilot (intelligent assistant), and Insight (knowledge insight), benchmarking against Microsoft 365 Copilot.
At the third quarter of 2023 results briefing, the management represented by Zhang Qingyuan responded that AIGC is fully prepared and will be the first to go online, while Copilot and Insight rely on self-developed small models, which are expected to be launched and charged after the year.
The management judged that it would be difficult for OpenAI and Microsoft Copilot to enter the domestic market in the short term due to compliance requirements, and also mentioned that WPS is ahead of Microsoft in some functions.
For example, Microsoft does not have the function of writing formulas for the time being, and Kingsoft does.
For the time being, Microsoft Copilot can only do limited tasks, such as chat summarization and document conversion, and has not yet achieved Copilot in the full sense of the word.
Microsoft is using a large model of OpenAI, AIGC capabilities may be better, and the rest of the features, we are confident to achieve the lead. The management of Kingsoft Office said.
Since the three AI features have not yet been launched, the company has not disclosed its pricing strategy or announced its commercialization progress.
On February 28, the company said that it will continue to invest in research and development in the field of AI and collaboration to enhance product competitiveness and accelerate the commercialization process.
Repeatedly mired in controversy
The Kingsoft Office, which has increased AI, has internal and external undercurrents, and has been questioned three times, and the stock price has been hit hard.
First of all, as soon as the product WPS AI was tested publicly, it caused a storm.
We will use the documents and materials you upload as the basic materials for AI training after desensitization. ”
Some users found this clause in the WPS Privacy Policy and were worried about their privacy being leaked.
In response, WPS officially apologized late at night, stating that "all user documents will not be used for any AI training".
Some users don't buy it, and they say "we can't know if we don't train or not" and "don't use user documentation to train AI, so what's the use?" and so on.
Secondly, the investment is a mystery.
The company said it is focusing more on fine-tuning large models, so that each model can play to its own strengths.
*: Jinshan Office.
WPS AI is connected to three large models: Minimax, Zhipu AI and Wenxin Yiyan, and according to different tasks, relatively advantageous models are called to deal with them. A Kingsoft office insider said.
Only working on the application side and training small models, the company spends money carefully. From January to June 2023, during the high-profile entry into AI, its R&D investment only increased by more than 70 million yuan year-on-year. Looking at the number of R&D employees, compared with the beginning of 2023, there are 90 fewer people.
Finally, senior executives and major shareholders have stirred up thousands of waves.
In the first half of 2023, the share price of Jinshan Office soared, with Zhang Qingyuan indirectly **** 1.68 million shares, and director Ge Ke indirectly ** 2.32 million shares.
From May to July, the share price of Kingsoft Office was in the range of HK$375-405, and its largest shareholder "WPS Hong Kong"** 4.61 million shares, receiving 1.8 billion yuan.
At the same time, the shareholder "Qiwen Nwei" ** 17.22 million shares, with an amount of more than 64600 million yuan, which is the employee shareholding platform of Kingsoft Office.
The two companies have a total share capital of 473%, picking a good time to make a move.
At present, Kingsoft office investors need to regain confidence. The performance exceeded expectations, and Zhang Qingyuan's team gave them some sense of security.