Shulou(Shulou.com)11/24 Report--

With the arrival of the big model, the logic of educational intelligent hardware has completely changed and entered a subversive era.

On August 24, NetEase youdao (NYSE:DAO), an educational technology company, released its unaudited financial results for the second quarter of 2023. According to the financial report, NetEase's net income of youdao Q2 reached 1.21 billion yuan, an increase of 26.2% over the same period last year. Among them, the net income of learning services is 680 million yuan, the net income of intelligent hardware is 220 million yuan, and the net income of online marketing services is 300 million yuan.

Due to the cyclical influence of the electronic consumer market, the total revenue of youdao smart hardware fell 7.4% in the current quarter compared with the same period last year, and the smart hardware business is still in transition. Gross profit margin rose to 35.8% from 30.6% in the same period last year, an increase of 17% over the same period last year.

Zhou Feng mentioned that youdao believes in the long-term prospects of smart hardware because they are convenient, useful and reasonably priced for consumers. Youdao focuses on two things to drive growth and profitability: continuous innovation, with youdao planning to release more innovative products in the fourth quarter; and optimizing marketing strategies and channels to increase the company's market share.

Intelligent learning hardware is in a transitional period.

In the first half of this year, due to the impact of the overall downturn in the consumer electronics market, the demand for terminal consumer electronics weakened, orders decreased, and revenue declined. In the A-share sector this year, most of the listed consumer electronics companies are expected to report a decline in performance, which also represents the slow recovery of terminal consumer electronics.

Compared with other types of hardware, the demand for intelligent learning devices is relatively flexible, but it is also affected to a certain extent.

Based on the macro grasp and careful observation of the market, youdao strategically withdrew some sales channels with low return on investment in the second quarter of this year. In this regard, Zhou Feng pointed out that considering that the long-term goal of youdao is to achieve sustainable growth and comprehensively improve the company's profitability, it is not an one-sided expansion for the sake of scale. Therefore, on the one hand, youdao strictly manages sales and marketing expenses to improve profitability; on the other hand, youdao actively innovates, adjusts the product price point, and constantly optimizes products to meet the needs of users. For example, the recently released dictionary pen new product S6 is priced at 499 yuan, in which the built-in features exceed consumers' expectations and are widely welcomed by the market. The first 5500 units sold out in a short time.

Meanwhile, Zhou Feng is optimistic about the long-term development of the smart hardware market. According to a research report released by the Internet Society of China in July this year, the market size of learning equipment is expected to increase from 24.9 billion yuan in 2019 to 43.1 billion yuan in 2022. At present, the penetration of learning devices in the market is still relatively low, and there are still a large number of potential users who have not yet used smart learning hardware, which represents an important growth opportunity for youdao.

Large models help intelligent hardware innovation, business growth ushered in new momentum

In a market environment that has not yet fully recovered, there is a way to seize the growth opportunity.

The development of artificial intelligence technology expands a broader space for the educational hardware market. With the emergence of the AI model, the human-computer interaction and content generation of educational intelligent hardware have undergone earth-shaking changes. To some extent, this change has injected a strong driving force into the development of youdao.

Youdao has accumulated in artificial intelligence for more than 8 years. Since 2016, we have started to work together to build AI basic capabilities, and synchronously set up language, vision, sound and other teams. At present, we have accumulated four underlying technologies: neural network translation, computer vision, intelligent voice AI technology, and high-performance computing, while ploughing deep into the field of transformer. In March 2023, youdao announced that it would launch the first big model of education in China, and the big model of "Zi Yue" was officially launched in July.

From the very beginning, "Zi Yue" has been positioned as "scene first", constantly exploring the practical application of artificial intelligence technology in various fields, focusing on designing customized models for different learning scenes, in order to achieve a high degree of fit between the model and the scene. In youdao's view, the large model itself is not mysterious, nor can it form a barrier alone, let alone simply integrate with the hardware, what is more important is how to deeply integrate and develop the large model and the scene. This strategy can not only promote the commercialization of the AI model, but also inject new vitality and competitiveness into the company's products and services.

The biggest feature of the combination of the big model and education is that the big model can 'reshape' education so that it can be more personalized, guided and integrated. Based on the deep insight into the user's usage scene, the big model of "Zi Yue" has landed six applications-- "LLM Translation", "Virtual Human spoken English Coach", "AI composition Guide", "Grammar intensive instruction", "AIBox" and "document question and answer".

The youdao dictionary pen X6 Pro is the first product to implement "Zi Yue" large model technology on hardware. X6 Pro has four AI interactive capabilities, including question-and-answer, grammar intensive speaking, AI speaking coach and general subject learning. Among them, the AI oral coach is actually the first landing of the virtual human oral coach Echo. In the process of dialogue, Echo can interact like a human teacher, through heuristic dialogue guidance, real-time feedback, to make learning knowledge more interesting and rich.

The launch of the dictionary pen X6 Pro has successfully broadened the boundary of the dictionary pen category, making it no longer just a translation tool, but an AI teacher who can answer questions around the clock. The innovation in design and function of this product subverts people's understanding of traditional dictionary pens and brings a new experience for learners.

X6 Pro performed very well in the market, and users welcomed this new dictionary pen more than expected. Soon after its listing, it won the first best-selling list of Tmall electronic dictionary and the first sales of JD.com dictionary pen industry.

The success of the dictionary pen X6 Pro is not only the concrete embodiment of the strategic value of youdao's "scene first", but also the reward of youdao's deep thinking and innovative exploration of products and markets. In the future, youdao will continue to innovate, bring more innovative and practical products and services to consumers, and achieve the sustainable development of the company.

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