Shang Tang’s anxiety, the Metaverse story can’t be solved

Metaverse business, for the time being, is just storytelling.

Shang Tang's anxiety, the Metaverse story can't be solved

SenseTime, once a star and a moon , has now become the “abandoned son” of investors.

On June 30, SenseTime ushered in the first day of lifting the ban, and the shares lifted on that day accounted for about 73% of the total share capital of SenseTime. After the opening of the Hong Kong stock market, the share price of SenseTime plummeted. At the close, the share price was only HK$3.13/share, which fell below the issue price of HK$3.85/share, and the market value evaporated by HK$90 billion compared with the previous trading day.

According to China Business News, Deng Zhijian, director of investment strategy of DBS Bank, said that judging from the lifting of the ban, cornerstone investors are all selling.

Investors have lost confidence in SenseTime for a reason. Judging from the prospectus and financial report, from 2018 to 2021, Shangtang’s net losses were 3.433 billion yuan, 4.968 billion yuan, 12.158 billion yuan and 17.1 billion yuan respectively. A total of 37.6 billion yuan in losses over the four years.

Even if Shang Tang said that most of the losses in 2021 were caused by changes in the fair value of preferred shares, the adjusted net loss was 1.418 billion yuan, and the four-year loss reached 22 billion yuan.

Shang Tang's anxiety, the Metaverse story can't be solved

The loss of Shangtang Technology, picture source Shangtang prospectus

If short-term losses can be exchanged for long-term gains, it may be understandable, but the commercialization prospects of Shangtang are unclear, and the income cannot support the high R&D costs.

Under this, SenseTime has been talking about the Metaverse planning since last year, hoping to restore investor confidence through new stories.

According to incomplete statistics from Wired Insight, SenseTime has launched digital human, digital cultural and creative products, AR navigation, AR inspection and other projects in the Metaverse business.

It seems that there are many landing projects, but Metaverse has not brought more revenue to Shangtang. Judging from the financial report, the smart life segment to which Metaverse business belongs will have a revenue of 415 million yuan in 2021, while the revenue of this segment in 2020 will be 433 million yuan. Not only did the Metaverse business not bring in more revenue, it actually declined.

But Shangtang has not given up telling the story of the Metaverse. Xu Li, the co-founder and CEO of Shangtang, recently stated at the 2021 World Artificial Intelligence Conference (WAIC) Shangtang Technology Artificial Intelligence Enterprise Forum that this year, Shangtang will bring SenseMARS to Mars. The mixed reality platform is combined with unmanned self-driving vehicles to create self-driving AR minibuses.

SenseTime expects to rely on the Metaverse to create a second curve and gain more revenue, but the story of the Metaverse is not so easy to tell.

“Shang Tang is rubbing up on the concept of the Metaverse, in essence, it wants to increase the confidence of investors, so that investors feel that these new opportunities have development prospects. But in fact, it may take 5 years, or even 10 years, for the Metaverse to truly land.” Investor Yu Xiao said.

1. Shang Tang tells the story of the Metaverse

Just put on the MR glasses, the virtual characters on the wall “live”, the original two-dimensional picture has become a three-dimensional image that is close at hand, and players can also become popular virtual idols with these Bilibili (referred to as BilibIli). Interactive chat, as if communicating with a real person.

In the offline carnival event held by Bilibili in 2021, SenseTime and the MR virtual experience hall jointly built by SenseTime and the “Metaverse” created by AI+MR allowed players to experience an immersive role-playing game.

Shang Tang's anxiety, the Metaverse story can't be solved

The MR virtual experience hall created by SenseTime and Bilibili, picture source SenseTime public account of SenseTime Technology

This is the landing of SenseTime in the Metaverse, and the technology behind it comes from the SenseMARS Mars mixed reality platform of SenseTime. In Shangtang’s listing prospectus, it said that the SenseMARS software platform contains more than 3,500 artificial intelligence models, supporting a new Metaverse experience.

In the 761-page prospectus, Shang Tang mentioned the Metaverse many times, which became the story that it focused on when it went public. After the listing, Shang Tang is also looking for various scenarios to expand its Metaverse layout.

Recently, SenseTime has carried out 3D reconstruction and digital reconstruction of the painting “Song people and horses Xu Beihong” created by Xu Beihong through AI+AR technology. By scanning the physical base of the product through SenseTime’s digital cat App cultural and creative platform, the originally static horse can “move”.

Behind this, the AI ​​capabilities of the SenseMARS Mars mixed reality platform of SenseTime are used, which can combine “physical base + digital content” to project digital cultural and creative content such as videos and 3D models into the real world.

This is also not the first time that the SenseTime digital cat APP cultural and creative platform has cooperated with traditional cultural IP. Previously, Shang Tang also cooperated with Dunhuang Cultural and Creative to digitize the murals of “A Moment of a Thousand Years-Dunhuang”. In the near future, it will also launch the second work based on the story script of “Shakyamuni’s Conquering the Devil and Enlightenment” in Cave 254 of Dunhuang.

SenseTime wants to create a series of digital cultural and creative products by cooperating with traditional cultural IPs and sell them to related enthusiasts. However, SenseTime is not the only one doing digital collections. Companies such as Tencent Magic Core, Ali Jingtan, and JD Lingxi have also cooperated with well-known domestic IPs to launch related digital cultural and creative products. Their AI and AR capabilities are not inferior to SenseTime. .

SenseTime may also be aware of this, and for this reason, it is also constantly exploring cooperation with other industries, and even proposed the concept of a space Metaverse.

“AI technology gives machines the ability to understand the real world, while AR is the re-expression and re-creation of understanding, and is an important basis for driving the space Metaverse.” At AWE (Augmented World Expo) Asia 2021 World XR Industry Expo, Li Yufei, product director of SenseTime, said in his speech.

SenseTime believes that as a connection between the physical world and the virtual world, the space Metaverse is reshaping the relationship between people, people and space, and even between people and the real world, and derives diversified economic formats and commercial values.

The so-called space Metaverse refers to the use of AI+AR technology in cultural tourism, commercial real estate, parks and other fields. For example, after SenseTime cooperates with Chengdu IFS International Financial Center, it realizes AR navigation and navigation of all scenes from the underground parking lot to all brand stores, service facilities and supporting office buildings, hotels and serviced apartments in the shopping mall, as well as adding in the user navigation process. Marketing content such as gift vouchers, new product recommendations, theme event promotion, etc., trying to achieve the purpose of helping merchants to promote.

Shang Tang's anxiety, the Metaverse story can't be solved

SenseTime AR guided tour service, image source SenseTime public account of Shangtang Technology

However, such AR navigation services have long been involved in players. Both Google Maps and AutoNavi have launched related AR navigation services, and map manufacturers have more significant advantages. After all, users can switch from daily map mode to AR navigation more smoothly.

“AI companies have strong technical capabilities, mainly in the bottom-level general algorithms, but players in these industries have almost mastered them, and there is not much difference between them.” Yu Xiao said.

Judging from the current landing of SenseTime in Metaverse, almost every field has vertical industry players, and SenseTime’s technical advantages are not obvious. It is not easy for Shang Tang to tell the story of the Metaverse.

2. Can the Metaverse business become the second growth curve?

“The concept of the Metaverse is very grand, but what kind of experience it can bring is very unclear now, and the uncertainty is too great.” Yu Xiao said.

But Shangtang doesn’t seem to think so. In its first financial report after listing, it has high hopes for the Metaverse business.

“Another important part of the smart life sector is the SenseMARS Mars mixed reality platform business that empowers the development of Metaverse. Its development goal is to become an industry-leading Metaverse empowerment platform,” said SenseTime.

To this end, Shang Tang also listed the performance of the SenseMARS Mars mixed reality platform in the financial report: more than 200 mobile applications and mobile games have embedded the SenseMARS engine. At the same time, more than 60 large shopping malls, museums and airports have developed interactive applications based on SenseMARS to better serve customers.

“There are better scenarios for the Metaverse to land now. One is the B-side, such as helping factories to do simulations, and the other is the field of game entertainment. But to achieve the “Ready Player One” that completely moves the real world into the virtual world, it is uncertain now. Too much sex. This not only tests the ability of AI algorithms, but also depends on hardware facilities.” Yu Xiao said.

From the perspective of Shang Tang’s vision of the Metaverse, it mainly wants to drive the Metaverse project through AI capabilities. “As the development ecology around SenseMARS gradually matures, we expect a new batch of popular Metaverse applications to be born on SenseMARS in the future.” Shang Tang said in the financial report.

SenseTime does not consider the hardware foundation, which is related to its own lack of accumulation in this area. After all, the main research direction of SenseTime since its establishment has been AI algorithms, and hardware is not its strength.

But now as open source becomes more and more mature, the underlying general algorithms of various AI companies are not very different. The next challenge is who is closer to customers, understands customer needs better, and runs targeted applications after obtaining customer data. and product, and finally make the delivery. In this regard, Shang Tang may not be good at it.

“AI companies such as SenseTime are not good at dealing with traditional companies, and their comprehensive capabilities are not as good as those of companies such as Haikang and Dahua that have accumulated a large number of customers and have the ability to land. Therefore, SenseTime is now accepting image projects that are not bad for money. And the project will definitely use the best and most dazzling algorithm, which not only shows the strength of AI, but also the project effect is good, and it can support the scene.” Yu Xiao analyzed.

Judging from the current Metaverse project of Shangtang, it seems to confirm this statement. According to Wired Insight, SenseTime mainly prefers virtual cultural and creative products, virtual characters, AR tours, etc. In addition, it has also cooperated with China Southern Power Grid on AR inspection projects.

Shang Tang's anxiety, the Metaverse story can't be solved

Transformer 3D model effect generated based on SenseMARS of SenseTime, picture source SenseMARS official website

For example, SenseTime has cooperated with Bank of Ningbo Shanghai Branch and Agricultural Bank of China Hangzhou Zhongshan Branch to develop digital human staff, trying to provide customers with business consulting and handling services instead of bank lobby managers. In the future, SenseTime also wants to promote digital humans to shopping malls, exhibition halls, tourist attractions and other industries.

The emergence of digital humans can indeed ease the pressure on human resources and release certain human resources. However, from the perspective of practical application, the questions that can be answered by the digital human are relatively basic at present. When it comes to complex problems, it is still necessary to return to manpower, and how many people can accept the cold question and answer of the digital human remains to be further verified.

The AR inspection project in cooperation with China Southern Power Grid may be more valuable. Through AR inspection and remote “twin” guidance technology, power grid experts can also mark in front of the computer, and push the three-dimensional object identification and maintenance instructions to the inspection personnel’s AR On the glasses, collaboratively and quickly solve on-site operation problems.

But this also requires hardware equipment such as AR glasses, and SenseTime is not the only manufacturer with this technology, and its cost may be more expensive than other manufacturers. In comparison, how many customers can SenseTime grab?

“From the perspective of the enterprise, we should not pin our hopes on the Metaverse. Under the current environment, the Metaverse can only be used as one of the company’s future directions.” Yu Xiao said.

3. How much confidence can the new story help SenseTime regain under the slump?

On the first day of lifting the ban after listing, SenseTime’s stock price suffered a cliff-like drop.

On June 30, all the shares held by investors and cornerstone investors before the listing of Shangtang were lifted, and the lifted shares accounted for about 73% of the total share capital of Shangtang.According to China Economic Weekly, the transaction volume of Shangtang Technology on that day was HK$6.198 billion, which was more than 30 times higher than the transaction volume of HK$158 million in the previous trading day. A “Battle Royale” is being staged.

SenseTime also anticipated this situation for a long time. For this reason, it issued an announcement early in the morning that co-founder, chairman and CEO Xu Li, chief scientist Wang Xiaogang, executive director Xu Bing and several management members voluntarily promised to extend their holdings. The restricted Class B shares, together with the Class A shares that are still locked up, combined representing approximately 28.44% of the company’s total issued shares will continue to be locked up until December 29, 2022, and the lock-up period will be extended to 12 months.

But SenseTime’s emergency move failed to stop the stock’s decline. Under the sell-off of investors, SenseTime plummeted after the market opened. As of the close of the day, it closed at HK$3.13 per share, the stock price fell 46.77%, and the market value evaporated by HK$90 billion compared with the previous day.

It is worth mentioning that, according to the Financial Associated Press, according to data from the Central Clearing and Settlement System of the Hong Kong Stock Exchange, half a month before the expiry of the lifting period, there were as many as 14.084 billion Shangtang shares, accounting for about 54% of its outstanding shares. The real-name shares were transferred to the Central Clearing and Settlement System (CCASS), and then successively deposited in Futu, Huatai Securities , CICC, and Guotai Junan. Among them, Futu held as many as about 600 million shares, while Huatai Securities, CICC, and Guotai Junan increased their holdings by about 1.404 billion, 1.217 billion and 1.032 billion shares respectively.

According to industry insiders, the large-scale storage means that the major shareholders have made arrangements to sell goods in advance, and this move is also an important reason for the loss of confidence in the majority of investors.

Shareholders and investors have “abandoned” SenseTime, mainly because they have no confidence in the future prospects of AI companies.

SenseTime’s main business is divided into four major sectors: smart business, smart city, smart life and smart car. However, from the financial report, the total revenue of smart business and smart city business in 2021 will account for 87.3% of the total revenue. And the proportion shows a further upward trend, while the proportion of smart life and smart car business in total revenue will drop from 17.2% in 2020 to 12.7% in 2021.

Shang Tang's anxiety, the Metaverse story can't be solved

SenseTime’s main business revenue, picture source SenseTime’s financial report

The Metaverse business included in the smart life business has always been a new story that SenseTime wants to tell. In the second half of 2021, the concept of Metaverse exploded, and SenseTime mentioned the Metaverse dozens of times in its listing prospectus, and released several Metaverse projects after that.

However, reflected in the financial data, the smart life sector of the SenseMARS Mars mixed reality platform that supports the development of SenseTime has not brought more revenue to SenseTime.As of December 31, 2021, the revenue of SenseTime’s smart life segment was 415 million yuan, accounting for 8.8% of the total revenue, while the revenue of this segment in 2020 was 433 million yuan, accounting for 12.6% of the total revenue.

It is worth noting that the number of customers in the smart life sector will increase from 236 to 257 in 2021, a year-on-year increase of 8.9%. This means that the increase in the number of customers did not bring more revenue, but reduced revenue by 4.33% year-on-year.

From the perspective of market size, according to the US Bloomberg Industry Research survey report, the global market size of the Metaverse will reach 800 billion US dollars by 2024. According to a research report titled “Creating Value in the Metaverse” released by consulting firm McKinsey, the global Metaverse market is expected to grow to $5 trillion by 2030.

The Metaverse market has a bright future, but the competition is also fierce.

In this field, SenseTime not only has to face peer players such as Megvii, Yitu, and Yuncong, but also has to face strong opponents integrating software and hardware capabilities such as Hikvision ,Sunny Optical , Goertek , and Oufeiguang. , and many big companies such as Baidu, Tencent, and Huawei have entered the game.

In the face of so many strong opponents, Shang Tang still plunged into the air.

At the 2021 World Artificial Intelligence Conference (WAIC) Shangtang Technology Artificial Intelligence Enterprise Forum, Xu Li, co-founder and CEO of Shangtang Technology, said that this year, Shangtang will combine the SenseMARS Mars mixed reality platform with unmanned autonomous vehicles to make Passengers have the feeling of being in a different dimensional world.

Shang Tang's anxiety, the Metaverse story can't be solved

SenseTime self-driving AR minibus, image source SenseTime public account of Shangtang Technology

Specifically, all the glass in the self-driving minibus will be converted into an augmented reality screen, and the content outside the car will be projected onto the screen in real time, thereby creating an autonomous AR minibus.

Metaverse + autopilot, with the superposition of two hot concepts, Shangtang seems to have a better story, but who will buy it? With shareholders fleeing, will the capital market believe in the prospect of new stories? 

(The cover image of this article comes from the official website of SenseTime. At the request of the interviewee, Yu Xiao is a pseudonym.) 

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