Is Tintin's solo journey a blessing or a curse?

Image source: @VisualChina

Text|Light Cone Intelligence Author|Hao Xin Editor|Liu Yuqi

The world's major events must be divided for a long time. Aliyun and Tintin's "couple" are no exception.

On August 14, Alibaba Group made it clear that DingTalk will continue to develop and promote incubation independently as an independent company within the group.

People said DingTalk has always been an independent company under Alibaba. Prior to the organizational restructuring, Alibaba Cloud Intelligent Business Group operated it. After Alibaba Cloud announced its spin-off from Alibaba Group, DingTalk will continue to develop independently as an independent company.

Since 2020, DingTalk and Alibaba Cloud have followed the "Cloud Chat Convergence" strategy and worked closely together in organizational structure, business cooperation, financial data, ecological construction and other aspects. Alibaba Cloud provides DingTalk with a stable foundation for cloud resources, business development, and internal resource coordination, while DingTalk's low-code platform and ecosystem provide Alibaba Cloud with an important starting point for 2B implementation, complementing each other.

It is worth noting that people said that Alibaba Cloud and DingTalk will continue to maintain close business cooperation.

That is to say, this independent focus, in addition to the sale of the business, is more about the separation of organizational structure and financial data. After the spin-off, DingTalk must maintain independent accounting, bear its own profits and losses, and carry out more fierce market competition.

In fact, Tintin's solo flight was both unexpected and reasonable. Not long ago, after Alibaba's "1+6+N" organizational change, Alibaba Cloud appeared in the first category of the list. Group filtering aside, Alibaba Cloud has always maintained a more unified and objective standard. Many industry insiders analyzed that this separation is for Alibaba. First time in the cloud ready for independent listing.

From the final data of the financial report, you can get a glimpse of it. According to Alibaba's financial report for the second quarter of 2023, as of June 30, 2023, the adjusted EBITA of Cloud Intelligence Group was 387 million yuan, a year-on-year increase of 106%. The financial report explained that the turnaround was mainly due to the decline in roaming fees and broadband fees caused by the normal use of DingTalk compared with the same period last year.

(Source: Alibaba Financial Report)

This means that DingTalk has returned to normal after three years of user growth, and the impact on Alibaba Cloud's costs and profits will be immediate. The divestiture of expensive and unprofitable businesses actually gave a positive boost to Alibaba Cloud's financial performance.

The three-year honeymoon period is over. Both Alibaba Cloud and DingTalk will face more fierce market competition and ratings, and both sides can unload their baggage and enter the battle easily.

01 Can the independent DingTalk be renewed for another three years?

In September 2022, Ye Jun, chairman of DingTalk, said in an interview with the media that DingTalk's revenue growth rate exceeded triple digits, and the total revenue so far was not high, but the gross profit margin was very high, exceeding the average. Software industry. In June this year, he reiterated DingTalk's hope to achieve a breakthrough within three years. After independence, can DingTalk still fulfill the "three-year contract"?

In the past few years, the commercialization of DingTalk has gone through two main stages.

In the first stage, on the road to commercialization, although DingTalk firmly established its position as the first collaborative office company in China, it exchanged "free" for the number of users. With more than 600 million users, more than 23 million enterprise institutions, and more than 15 million paid daily active users, the user tariff is only 2.5%.

In the past, DingTalk actively pursued the "free" strategy, which took five years to achieve scale, expanding from the initial simple office function to industry-specific solutions, and the number of users increased tenfold.

But "free" also brought DingTalk to a standstill. High operating and development costs forced him to face harsh realities.

In March 2022, DingTalk launched the DingTalk Professional Edition for small and medium-sized enterprises with an annual fee of 9,800 yuan. Later, DingTalk formed three main commercialization models, namely the "three specialty" annual fee model, the platform profit sharing model and the hardware licensing model. "Three special prices" refers to the three paid versions of DingTalk, namely Professional DingTalk, Exclusive Ding, and Exclusive Ding. These three models are currently DingTalk's main sources of revenue.

DingTalk after charging means turning to profitability and abandoning standards such as To C monthly activity. This is the second stage of DingTalk's commercialization.

(DingTalk current billing standard table)

After this transformation, DingTalk's commercialization has made great progress, but it is also difficult to get rid of the tangled business model of collaborative office.

In the Chinese market, companies are generally reluctant to pay for software. Most of the users are small and medium-sized merchants, but their willingness and ability to pay are not strong. User adoption of subscription billing models is not enough. Users often follow their own needs and cannot form long-term paid subscription habits; Long lead times and problematic digitization. The participating office companies work the hardest, but the profit margins are small.

The problem of DingTalk is not an individual case, but a common problem in the entire collaborative office industry and even China's SaaS software. According to the statistics of the "2021 China SaaS Survey Report", the payment rate of office software in mainland China is less than 15%, while the payment rate of office software in the European and American markets has exceeded 70%.

DingTalk is still searching, and Alibaba Cloud will continue to move forward.

Industry insiders conclude: If calculated independently, DingTalk may be able to purchase resource services from Alibaba Cloud in the form of customers, and DingTalk's expenses will be transferred from expenses to Alibaba Cloud's revenue. However, at the same time, DingTalk's revenue is no longer included in Alibaba Cloud, and the organizational structure has become flatter, which is conducive to the transformation of intelligent products.

Since then, Tintin has faced the test of the blood he has brought to himself, and at the same time entered the wider world.

According to a number of reliable sources, there are already investment institutions interested in investing in DingTalk. If it invests, it is expected to improve DingTalk's current business difficulties in other aspects. The split of DingTalk will not only affect performance, but also help DingTalk's valuation recover. If we compare the current number of DingTalk users in China with Salesforce, DingTalk should score well. On the other hand, Alibaba Cloud's independent deployment of capital, especially state-owned assets, is also more advantageous.

"DingTalk is C2B, a very unique target in the whole industry, and if you bring in external investors, they will definitely go for it." The investor said.

Previously, DingTalk also lost the ability to connect many IaaS clouds due to the "Cloud Pinning into One" strategy. This time, the deep binding relationship between DingTalk and Alibaba Cloud may be released, and it may be possible to invest in the hands of multiple cloud service providers, integrate the advantages of various enterprises, and further consolidate core capabilities.

Scaled, PaaS and organic. As a leader in the collaborative office industry, DingTalk has handed over the answer sheet of the previous level. Whether the contract can be renewed for three years and achieve break-even has become a question that DingTalk needs to answer when embarking on a new journey.

02 Thicker DingTalk accelerates smart running

"Today we have reached a new point in time, we have officially entered the BPaaS (Business PaaS) era from the APaaS (Application PaaS) era. We will further open up DingTalk's core capabilities so that service providers and partners can get more DingTalk support. In 2022, when Ye Jun officially announced that DingTalk would be fully PaaS, he set a goal.

Based on this, in the past two years of "cloud integration", DingTalk itself has been improving its internal strength, mainly focusing on two aspects, one is to build a thick PaaS platform, and the other is to strengthen the ecology.

Cloud computing infrastructure linked below and business-critical applications linked above. DingTalk's strong middle-class capabilities are reflected in the fact that from the beginning of business communication applications, its functions have been horizontally extended to OA, HR, finance and taxation, OKR and other office fields. It combines multiple features while creating a thriving ecosystem on its PaaS platform.

Data shows that as of December 28, 2022, the number of DingTalk users has exceeded 600 million, the number of enterprise organizations has exceeded 23 million, the total number of ecological partners has exceeded 4,000, and the number of DingTalk open platform applications has exceeded 1,100. At the same time, as of the end of September 2022, the number of DingTalk low-code applications exceeded 5 million, an increase of more than 120% over the previous year. According to DingTalk's plan, by 2024, the total number of "DingTalk applications" (low-code applications + SaaS applications) on the DingTalk platform will increase to 10 million.

The capacity of the middle platform has been enhanced, and the ecology has initially matured. DingTalk has widened the distance with similar office collaboration software such as Feishu and WeChat. This can also enhance DingTalk's confidence in independence.

The leader of the "cloud nail integration" era is also leading the intelligent era. When the wave of large-scale models arrived, DingTalk maintained the frequency of action once a quarter, and DingTalk became the fastest intelligent product in Alibaba's internal iteration:

On April 11, the day of the release of the unified Qianwen of Damo Alibaba, DingTalk announced that it will access the "unified Qianwen" of Damo for comprehensive transformation in the future.

Just a week later, DingTalk quickly held the DingTalk 2023 Spring Summit and took the opportunity to introduce the integration of products and smart functions based on Alibaba's unified Qianwen big tongue model. By entering the slash symbol (/), users can activate various AI functions, including creating articles, summarizing meeting minutes, creating images, building DingTalk mini programs, and training bots.

Also in the second quarter, DingTalk accessed the ability to unify Qianwen, and opened it to enterprise customers for testing and application.

In the third quarter, DingTalk has been transferred from the B page to the C page, and the personal version of DingTalk with built-in AI functions has been opened for testing. Support document writing functions such as article outline writing, marketing copywriting, and video scripting. Each user is equipped with AI "Little Two" intelligence. Aides.

In recent years, DingTalk has attached great importance to the combination of AI and PaaS platforms. The focus of future development is how to deeply integrate DingTalk's technical advantages and ecology with enterprise service scenarios.

Intelligence is the trend of the future. In the era of rapid product iteration, internal efficiency cannot be low. Lightweight DingTalk has walked out of the management system and audit mechanism of large enterprises with a more flexible and free attitude, and entered the road of intelligence. It is able to react quickly to the market, adjust direction in time, make decisions and upgrade iterations.

From the perspective of sales strategy, the gap between the sales strategy of DingTalk and Alibaba Cloud will be even greater after intelligent iteration. This requires DingTalk to establish a differentiated sales and service team and dynamically adjust it according to the characteristics of DingTalk and market conditions. After all, in addition to the product differences between the IaaS layer and the SaaS layer, the smart business journey is still in the stage of crossing the river by feeling the stones. DingTalk must be more direct and in-depth to enterprises and users, and work with enterprises to create a new way in the intelligent era.

In addition, the transmission of people also revealed some new information. According to media reports, DingTalk COO Ku Wei will be hired again to return to Alibaba Cloud, and the reporting object will also be changed from Ye Jun, vice president of Alibaba Group, to President and CEO of Alibaba Cloud Intelligent Business Group Daniel Zhang. It is understood that Kuwei was the vice president of Alibaba Group and the general manager of Alibaba Cloud IoT. He joined DingTalk in March 2022 and is responsible for DingTalk's key customer base, including product, sales and organic functions.

It is worth noting that Ku Wei was a former executive of China Unicom and has extensive experience in government and corporate clients. However, government and enterprise customers are the focus of Alibaba Cloud, not necessarily the focus of DingTalk.

After the split of Genting, DingTalk can transform the market and sales system. Whether the management system for large customers and small and medium-sized enterprises will be opened will remain the focus of attention in the future.

03 End

After completing the mission of the previous era, DingTalk and Alibaba Cloud are destined to look forward. DingTalk needs to solve its own legacy commercialization problems and take advantage of the new opportunities of the Gen-AI wave; An environment that pursues profitable growth and go-to-market. No matter who it is, the burden on them is not light.

What kind of future will DingTalk and Alibaba Cloud pursue? Time and the market will tell.