Financial Services Association, May 22 (Reporter Wu Xin) After experiencing a torrential performance in 2022, Jinshan Software (3888.HK) gradually broke out of its trough. Relying on the Jinshan office, which was once ridiculed as “lying down to make money,” Jinshan Software's net profit for Q1 this year reached 280 million yuan, an increase of 48% over the previous year.

Financial reports show that in Q1 2024, Jinshan Software achieved total revenue of 2,137 billion yuan, an increase of 8% over the previous year; achieved operating profit of 602 million yuan, an increase of 31% over the previous year. The aforementioned increase was mainly due to Jinshan Office's “office software and service business”, which accounted for 57% of Jinshan Software's total revenue. As a low marginal cost business, the business achieved revenue of 1,225 billion yuan, an increase of 17% over the previous year.

Specifically, it is reflected in the growth of Jinshan Office's domestic personal office subscription business, institutional subscription business, and institutional licensing business. Jinshan Software revealed that the former mainly benefits from increased user stickiness and paid conversions; the latter is due to the company's launch of WPS 365 and the promotion of Xinchuang's purchase orders.

AI product price reduction or impact WPS AI commercialization

It is worth noting that Jinshan Software mentioned AI several times in its financial reports. On the one hand, Q1's R&D costs increased 8% year over year, mainly invested in AI and collaborative products. On the other hand, the company initially opened up commercialization of WPS AI in March of this year.

However, the controversy surrounding WPS AI has continued since it was registered for public testing. In the fourth quarter of 2023, when WPS AI began public testing, the “WPS Privacy Policy” published by Jinshan Office caused user dissatisfaction with the description of how to handle user documents. Afterwards, they responded on the official Weibo account, but some users were still concerned.

Meanwhile, in March of this year, WPS AI received another complaint from consumers, claiming that it charges a doll style fee — that is, after purchasing WPS Super Member Pro, the AI function is charged separately. The relevant person in charge of WPS replied to the relevant media: “Member users previously used AI functions as a benefit, but now the benefit period has expired. In March 2024, commercialization of WPS AI began, and the investment was quite large.”

A Financial Services Association reporter noticed that domestic consumers' payment habits for AI functions have not yet been fully established. In this context, it remains to be considered whether the commercialization process of WPS AI can achieve the expected results. Recently, in particular, several companies announced drastic price cuts for large models, or even free of charge. For example, Tencent Cloud officially announced that the API input and output prices for many of its main models have dropped. Among them, the maximum configuration of the trillion parameter model Mixed-Pro has reduced the API input price by 70%. Additionally, iFLYTEK announced that iFLYTEX LiteAPI will be permanently free of charge, and Baidu also announced that its two major models are free.

Although Jinshan Office has accumulated a large number of individual users and institutional users who pay on WPS, the AI service market is fiercely competitive, and there are no few similar replacement products.

Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, said in an interview with a reporter from the Financial Federation that consumers may become more unwilling to pay for similar services because there are more free or low-cost alternatives on the market; this phenomenon may cause users to be less willing to pay for WPS AI, thereby challenging its commercialization process; users may compare services and prices of different platforms and choose more cost-effective options, especially when AI-assisted office tools are becoming more popular.

Zhan Junhao added, “If WPS AI can provide unique, efficient, and irreplaceable features and services, it may still attract users to pay for its value. In addition, the company also needs to continuously improve product value, simplify the fee structure, and ensure user privacy and security.”

Game business performance in the first quarter was lackluster

Gaming is another major revenue source for Jinshan Software. In Q1 of this year, it achieved a total revenue of 912 million yuan with other businesses, accounting for 43% of the company's total revenue. Revenue from this business was basically the same as the same period last year, down 1% year over year. Looking back at the full year of 2023, Jinshan Software's game business performance was also relatively lackluster, with a 6% increase over the same period.

According to the company, the slight year-on-year decline in the first quarter of this year was “mainly due to a natural decline in revenue from several existing games, partly offset by revenue contributions from games released in the second half of 2023.” According to information, revenue from the game business depends on Jinshan Software's flagship game “Sword Net 3” and the new game “Dust White Forbidden Zone”, which also contributed.

A CIFA reporter learned that the mobile “Sword Net 3 Unbounded” has begun multiple rounds of testing. The game is expected to be launched in June 2024, making the flagship game “Sword Net 3” available on all platforms. Looking at the domestic game market, the leading effect is obvious, with Tencent and NetEase taking the lead. Meanwhile, analysts told reporters that it remains to be seen whether Jinshan Software, which is good at mobile games, can reap the mobile game dividends.

In terms of new tracks, Jinshan Software said that in the first quarter, the two-dimensional shooter game “Dust White Forbidden Zone” daily active users and traffic increased sequentially. The sci-fi mecha game “Unrestricted Machine” also received a version number in March 2024, and is being tested and continuously optimized in mainland China and overseas regions.