Ali Jingdong goes to the sea of the Internet, and Huawei Baidu climbs the mountain of new technology
Entering 2024, the cloud services market is off to a particularly quiet start. After a short break during the Spring Festival holiday, the industry did not show the usual hustle and bustle and activity in March and April in the first two months of the year.
In the past, cloud vendors often took advantage of the new year to launch their business with various attractive price reduction strategies, in order to seize market share and win the favor of customers at the beginning of the new fiscal year.
Taking 2023 as an example, Alibaba Cloud took the lead in announcing a 15% to 50% price reduction for core products in April, with the intention of further expanding the user base and scale of public cloud and increasing the market penetration of cloud computing. Since then, Tencent Cloud, Baidu Cloud, JD Cloud, Huawei Cloud and Carrier Cloud have followed up and launched big promotion activities, and the entire market is very lively.
However, in 2024, except for Alibaba Cloud and JD Cloud throwing out "blockbuster" bombs that make users feel uncomfortable, there is nothing new. Other cloud vendors are very restrained, and in the nearly two months after the battle between the two clouds, they have no intention of "taking over" head-on.
So, why did the cloud service market, which fought a price war in previous years, appear in the situation of "Alibaba Cloud advances, other clouds stop"? On the other side of price reduction, what should cloud vendors think about?
01
Ali JD made a big fanfare, and other cloud companies didn't say a word
Although there are only two cloud providers that choose to reduce prices with great fanfare in 2024, it does not mean that their reductions are not big enough.
On February 29, Alibaba Cloud issued a notice announcing that the official website prices of cloud products will be lowered offline. This price reduction involves more than 100 products, including computing, storage, database, etc., with an average price reduction of more than 20% and a maximum reduction of 55%, which is the largest in the history of Alibaba Cloud and is also rated as the largest public cloud price war in history.
Outside the domestic market, on April 8, Alibaba Cloud announced that the overseas market would also follow the price reduction across the board, covering core cloud products and more than 500 product specifications deployed in 13 regional nodes around the world, with an average decrease of 23% and a maximum decrease of 59%. After the price reduction, the price of Alibaba Cloud's cloud products in overseas markets is lower than that of other international mainstream cloud vendors.
During this period, in the Taobao live broadcast room for the fourth anniversary of making a friend, Luo Yonghao appeared after a long absence, bringing goods to Alibaba Cloud for the first time, and the selection includes 4 cloud servers and cloud storage products mainly for entrepreneurs and small and medium-sized enterprises.
In the live broadcast, Lao Luo said, "If you are not in the enterprise and are not doing IT, you can send the screenshot to the company's IT to see, he may be excited after seeing this price, and he will definitely be impressed." You don't know what's going on, and when you send it to the company's IT, he collapses directly, and shouts, 'Lao Luo, your way is really wild'. ”
On the evening of the same day that Alibaba Cloud announced the comprehensive reduction of the selling price of cloud products, JD Cloud announced that all core products would continue to participate in the price comparison of the whole network, and shouted the slogan of "price comparison of the whole network, breaking down the low price, lowering it by 10%, and paying if you buy expensive", which took effect immediately from March 1.
In terms of publicity, in the face of the Lao Luo live broadcast cloud card played by Alibaba Cloud, JD Cloud responded positively and strongly, and cooperated with the radical slogan of "live broadcast price comparison, 10% lower than that of a specific live broadcast room", which made this price war between cloud service providers full of "gunpowder".
As in previous years, after the starting gun was fired, another wave of price reductions was coming, but the reality was not the case.
Except for Tencent Cloud's low-key announcement of a series of promotional activities including speech recognition, speech synthesis, AI painting and a series of AI products, whether it is Huawei Cloud and Baidu Cloud, which want to gain customers through technology, or e Cloud and Mobile Cloud, which are backed by operators, there is no sign of wanting to follow up on price reductions.
So, why are the cloud companies that were still in the store half a year ago able to collectively ignore Alibaba Cloud's price reduction "provocation" as if they had reached a tacit agreement?
02
Low prices are difficult to shake the market, and technological innovation and service stability will win the future
There is only one reason for this situation, that is, although Alibaba Cloud's round of price cuts is ruthless enough, the damage caused to friends is still not big enough, that is, the price reduction can no longer stimulate users' G points.
Specifically, although Alibaba Cloud's core products have broken through the lowest price on the whole network, this is only for small and medium-sized customers and individual users, and long-term cooperative large customers have already enjoyed lower contract preferential prices, and such price reductions will not have any impact on their costs at all.
However, the long-tail market of individual users and small and medium-sized enterprises is not so easy to be eaten by simple low prices.
Non-Flying (pseudonym), who is still in the doctoral study stage, told the odd-even school that he chose to use a cloud server because of the need to promote the project and related storage on different terminals. "But for a lightweight user like me, various cloud vendors actually have servers that college students can use for free, and I can still 'prostitute' them one by one after graduation in the future, and I don't have to buy them."
Mr. Ni, an IT manager of a company, told the odd-even pie, "Alibaba Cloud has indeed reduced the price, but our contract this year has already been signed, and whether the cloud service provider will be replaced next year due to cost changes is also next year", "In fact, after these years of price reduction, our sensitivity to price is not so high, but related technical support will be a more important factor."
In addition, Alibaba Cloud has reduced the price on an annual basis this time, and the catalog price has not changed, which means that there is no concession in the most important elastic business, and only those users with less elasticity will benefit, and what is the proportion of such users?
In addition to the increasing difficulty in mining the needs of individual users and small and medium-sized enterprises, Alibaba Cloud, which has been down four times in six years, also makes people doubt the stability of its services.
In December 2022, Alibaba Cloud's data center in Hong Kong went down due to a cooling failure, resulting in the unavailability of many services and the impact on several major customers. In the absence of a perfect backup redundancy plan, the server went down for more than 12 hours, making it the longest large-scale failure in Alibaba Cloud's more than a decade of operation.
Less than a year later, on November 12, 2023, due to abnormal access to the cloud product console and API calls, multiple Alibaba apps, including Taobao, Xianyu, DingTalk, Ele.me, and Cainiao, were inaccessible or had abnormal services.
Source: Weibo hot search
According to DoNews, after the Alibaba Cloud accident, the Nasyun charging pile issued an important notice saying that due to the failure of the Alibaba Cloud IoT service API interface, the equipment using Alibaba Cloud's related services could not be used normally. Leshuang CoolEasy issued an emergency notice saying that "the Alibaba Cloud network has collapsed across the country, resulting in problems on all platforms".
Such a situation is completely unacceptable for enterprises that rely heavily on cloud services. In the event of a single downtime, a series of direct economic losses such as lost orders, production shutdowns, and data loss far outweigh the cost savings caused by the small price difference between different cloud service providers. Under such a high-frequency accident, which company that wants to go to the cloud will not weigh it in their hearts?
Source: Odd and even drawing
From the perspective of competitors, following Alibaba Cloud's price reduction is far from being in line with their input-output model.
After the failure of Alibaba Cloud in the pursuit of the government and enterprise market, it gradually broke away from the original high-growth track, and had to switch back to the Internet model they are good at, that is, to achieve a price flywheel to retain users through low prices, and then consider the way to increase profits in the future, but this set of games can no longer make friends feel "afraid".
Taking HUAWEI CLOUD as an example, as the second largest public cloud vendor in China with a market share of 19%, it rarely plays the price card, and its confidence is constantly iterating on innovative technologies, such as migrating a large number of basic software, software and hardware development tools to the cloud, launching the Ascend AI cloud service with domestic AI computing power, HUAWEI CLOUD GaussDB, and fully independent and controllable MetaERP.
Combined with the market's concerns about Alibaba Cloud's service quality, cloud vendors understand that they can achieve healthy and stable market growth by relying on solid technological innovation and understanding of users, without over-reliance on price wars.
Especially in the face of Alibaba Cloud's price reduction strategy, considering its strategic adjustment after the failure of the government and enterprise market and the continuous doubts of the outside world about its service capabilities, cloud vendors are more convinced that finding market demand and strengthening their core competitiveness is a wise move to cope with challenges and win the market.
03
In the stock era, cloud competition is only "Yangmou"
For Alibaba Cloud, a large price reduction is also like a double-edged sword, which is stimulating market demand and seizing market share, while causing a significant impact on the distribution of interests between direct sales and agency teams.
The direct price reduction on the official website enables end customers to buy the same products and services at a lower price, which directly leads to a decrease in the price competitiveness of the agent channel. According to Lei Feng, a dealer said, "In the morning, the official website released a price reduction news, and in the afternoon, a customer came to us for consultation and asked if it could be implemented according to the new price." ”
Some dealers are concerned about this, "Now the price of many products has been attached to the cost line, if it is lowered again, it will further affect our rebate amount." An agent even revealed, "As long as Alibaba Cloud products are less than 3.8% off, there will be no rebates." And he checked the U1 model bandwidth according to the amount of the product yesterday morning, and there is no rebate for many years.
In the long run, if Alibaba Cloud fails to properly adjust the benefit distribution mechanism between direct sales and agency teams, the continued low-price strategy may accelerate the loss of agency groups. As a bridge between Alibaba Cloud and the majority of enterprise users, the marketing network, customized services and customer relationship maintenance capabilities of the agency are crucial to Alibaba Cloud's market penetration.
Source: Alibaba Cloud official website
Once a large number of agents choose to withdraw due to the loss of interests, Alibaba Cloud may face problems such as shrinking market tentacles, declining customer service responsiveness, and rising new customer acquisition costs, which is undoubtedly a huge concern for its long-term development.
It can be said that today, even for Alibaba Cloud, simple price reduction is no longer the market competition strategy that can drag friends to "launch", and has even become a complex choice that requires careful weighing of pros and cons and taking into account the interests of all parties.
The cloud service market has also been drawn a dividing line at this moment, and in the stock era, the competition between cloud enterprises has officially entered the stage of "refined" operation.
However, as Tang Daosheng, CEO of the Cloud and Smart Industry Business Group, said, "The essence of the price war has not changed, it is 'volume'." It's just that the market is more mature now, there are fewer players, customers become rational, and they will not choose simply because of price, but more importantly, the ability to provide high-quality services, and we must give full play to our technical advantages and improve the efficiency of supply chain management in order to reflect long-term cost advantages. ”