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A trove of imported console games vanish from Chinese online stores
In the world’s largest gaming market, China, console games play a relatively small part as their revenue has been meager compared to mobile and PC games for years — at least by the official numbers (more on this later). There remains a community of hardcore console lovers, but they are finding it harder to get hold of devices and cartridges recently.
A handful of grey market videogame console vendors on Taobao stopped selling and shipping this week, according to checks by TechCrunch and online posts by gamers. Before we examine what might be happening here, a bit of industry history is needed.
In 2000, China banned the sale and import of videogame consoles as concerns over addiction in teenagers grew. Even with the ban, imported consoles still existed in the grey market targeting a group of loyal players. Meanwhile, the online PC and mobile gaming industry flourished, in part thanks to their affordability and the social experience built into their mechanics.
When China finally lifted its restriction on consoles in 2015, giants like Sony and Microsoft quickly responded by releasing Chinese editions of their products through local partners. Nintendo Switch hit the Chinese shelves in 2019 via a much-anticipated partnership with Tencent, which itself is the world’s largest gaming firm. But the grey market largely persisted because mainland Chinese versions of the consoles are subject to strict regulatory oversight, which limits users’ choice to a small friendly range approved by censors.
Many Chinese players thus resort to brick-and-mortar electronics bazaars and online marketplaces to find imported editions of PlayStation, Xbox, and Nintendo Switch, along with their games. These products normally enter China through parallel trading, the import of legitimate goods through unauthorized channels. The games that are brought in normally lack a Chinese gaming license, which is hard to obtain even by local publishers.
Several major videogame console importers on Taobao have suspended business. Screenshot: TechCrunch
It’s unclear how many imported consoles and console games were taken down from Taobao and what triggered the purge. Tgbus, one of the largest console game sellers on Taobao with 462,000 followers, currently has zero product listing. When asked by TechCrunch, a customer service staff said the store has temporarily halted shipping due to “a water leak in the warehouse.” When we pressed further, the person said it was due to “an electrical-equipment failure.”
Other vendors keep their responses vague, citing “special reasons” for the suspended services. One seller named the “Shanghai Gaming Console Store” said it suspended its business at the request of Taobao, without elaborating further.
Alibaba could not be immediately reached for comment.
The incident appears to inflict mostly console sellers with a sizable business at this moment. Imported cartridges and console devices can still be found on smaller Taobao stores and alternative platforms like Pinduoduo by searching the right keyword.
Some users see the move as China further tightening its grip on what gamers get to play. Over the past year, Apple’s China App Store removed thousands of games to wipe out games without China’s official greenlight. Other motives are politcal. Animal Crossing was pulled from grey market stores on Taobao and Pinduoduo after one of Hong Kong’s most well-known pro-democracy activists used the game as his protest ground.
Other users point out that customs officers regularly clamp down on parallel trading, which is designed to evade import tax because goods are carried by traders who appear as regular travelers. This isn’t the first time the console grey market has been hit, either. Some grey goods manage to fly under the radar before they attract critical sales. There are signs that the new Monster Hunter Rise, a Nintendo-Switch exclusive which isn’t available on the Chinese console edition, is stoking much interest among local players in recent weeks and may have driven some imports.
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Alibaba passes IBM in cloud infrastructure market with over $2B in revenue
When Alibaba entered the cloud infrastructure market in earnest in 2015 it had ambitious goals, and it has been growing steadily. Today, the Chinese e-commerce giant announced quarterly cloud revenue of $2.194 billion. With that number, it has passed IBM’s $1.65 billion revenue result (according to Synergy Research market share numbers), a significant milestone.
But while $2 billion is a large figure, it’s one worth keeping in perspective. For example, Amazon announced $11.6 billion in cloud infrastructure revenue for its most recent quarter, while Microsoft’s Azure came in second place with $5.9 billion.
Google Cloud has held onto third place, as it has for as long as we’ve been covering the cloud infrastructure market. In its most recent numbers, Synergy pegged Google at 9% market share, or approximately $2.9 billion in revenue.
While Alibaba is still a fair bit behind Google, today’s numbers puts the company firmly in fourth place now, well ahead of IBM . It’s doubtful it could catch Google anytime soon, especially as the company has become more focused under CEO Thomas Kurian, but it is still fairly remarkable that it managed to pass IBM, a stalwart of enterprise computing for decades, as a relative newcomer to the space.
The 60% growth represented a slight increase from the previous quarter’s 59%, but basically means it held steady, something that’s not easy to do as a company reaches a certain revenue plateau. In its earnings call today, Daniel Zhang, chairman and CEO at Alibaba Group, said that in China, which remains the company’s primary market, digital transformation driven by the pandemic was a primary factor in keeping growth steady.
“Cloud is a fast-growing business. If you look at our revenue breakdown, obviously, cloud is enjoying a very, very fast growth. And what we see is that all the industries are in the process of digital transformation. And moving to the cloud is a very important step for the industries,” Zhang said in the call.
He believes eventually that most business will be done in the cloud, and the growth could continue for the medium term, as there are still many companies that haven’t made the switch yet, but will do so over time.
John Dinsdale, an analyst at Synergy Research, says that while China remains its primary market, the company does have a presence outside the country too, and can afford to play the long game in terms of the current geopolitical situation with trade tensions between the U.S. and China.
“Alibaba has already made some strides outside of China and Hong Kong. While the scale is rather small compared with its Chinese operations, Alibaba has established a data center and cloud presence in a range of countries, including six more APAC countries, U.S., U.K. and UAE. Among these, it is the market leader in both Indonesia and Malaysia,” Dinsdale told TechCrunch.
In its most recent data released a couple of weeks ago, prior to today’s numbers, Synergy broke down the market this way: “Amazon 33%, Microsoft 18%, Google 9%, Alibaba 5%, IBM 5%, Salesforce 3%, Tencent 2%, Oracle 2%, NTT 1%, SAP 1% – to the nearest percentage point.”
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Priori raises $6.3M to help large companies hire outside legal help
Priori Legal, a startup rethinking the way that large corporations hire outside counsel, has raised $6.3 million in Series A funding.
Founded by CEO Basha Rubin and CPO Mirra Levitt (who met while classmates at Yale Law School), Priori launched as a legal marketplace for small and medium businesses before finding its current model in 2016.
Rubin explained that although Fortune 500 companies have their own in-house legal teams, they still spend an average of $150 million a year on outside legal counsel. And finding that counsel can be an arduous process — a consumer goods company, for example, might need to hire lawyers in all 50 states.
So by creating a marketplace of vetted lawyers (it says it only accepts 10% of applicants), by running a bidding process for the work and by streamlining the billing and on-boarding process, the startup can save companies an average of 60% of the money they spend on outside counsel and reduce the search time by 80%.
“We don’t get involved in the substance of the lawyer-client relationship,” Levitt added. “We are not a law firm, we don’t do any of the legal work. Our innovation is focused entirely on the process of rapidly identifying the right talent and, once the matter is up and running, making billing seamless.”
There are currently more than 1,500 lawyers in the marketplace, representing all 50 states in the U.S., as well as 47 countries and 700 practice proficiencies. Levitt said that while the first lawyers to join the platform were usually independent or worked at small firms that might not previously had access to these kinds of clients, there are now larger firms signing up as well.
Priori founders Mirra Levitt and Basha Rubin
And Rubin said interest in Priori has only grown during the pandemic and the resulting economic downturn. Companies are trying to do “more with less,” and “part of our value proposition is fundamentally cost savings.” For example, she noted that client spending on the platform has increased 200% in the last year.
“We began to see so much inbound demand that we would log onto Slack at 11pm and the entire team would be working,” she said. “We have a truly extraordinary team, but a) that’s not sustainable from a human perspective, and b) we saw an opportunity to really grow dramatically if we could throw resources at it.”
The Series A comes from Hearst Corporation (also a Priori customer), Great Oaks Venture Capital, Jambhala, Tim Steinert (former general counsel of Alibaba Group), Mindset Ventures, Bridge Venture Fund and Orrick’s Legal Technology Fund.
In addition to growing the team, Rubin said that the new funding will allow Priori to expand its network of lawyers, especially internationally.
“From a product perspective, we’re really building out our use of data throughout the platform,” Levitt said, adding that the company plans to use machine learning to improve attorney vetting, matchmaking, bidding, project scoping and more.
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Will China’s coronavirus-related trends shape the future for American VCs?
Rocio Wu
Contributor
Contributor
Rocio Wu is a second-year MBA candidate at Harvard Business School and a venture capitalist.
For the past month, VC investment pace seems to have slacked off in the U.S., but deal activities in China are picking up following a slowdown prompted by the COVID-19 outbreak.
According to PitchBook, “Chinese firms recorded 66 venture capital deals for the week ended March 28, the most of any week in 2020 and just below figures from the same time last year,” (although 2019 was a slow year). There is a natural lag between when deals are made and when they are announced, but still, there are some interesting trends that I couldn’t help noticing.
While many U.S.-based VCs haven’t had a chance to focus on new deals, recent investment trends coming out of China may indicate which shifts might persist after the crisis and what it could mean for the U.S. investor community.
Image Credits: PitchBook
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Databricks brings its Delta Lake project to the Linux Foundation
Databricks, the big data analytics service founded by the original developers of Apache Spark, today announced that it is bringing its Delta Lake open-source project for building data lakes to the Linux Foundation under an open governance model. The company announced the launch of Delta Lake earlier this year, and, even though it’s still a relatively new project, it has already been adopted by many organizations and has found backing from companies like Intel, Alibaba and Booz Allen Hamilton.
“In 2013, we had a small project where we added SQL to Spark at Databricks […] and donated it to the Apache Foundation,” Databricks CEO and co-founder Ali Ghodsi told me. “Over the years, slowly people have changed how they actually leverage Spark and only in the last year or so it really started to dawn upon us that there’s a new pattern that’s emerging and Spark is being used in a completely different way than maybe we had planned initially.”
This pattern, he said, is that companies are taking all of their data and putting it into data lakes and then doing a couple of things with this data, machine learning and data science being the obvious ones. But they are also doing things that are more traditionally associated with data warehouses, like business intelligence and reporting. The term Ghodsi uses for this kind of usage is “Lake House.” More and more, Databricks is seeing that Spark is being used for this purpose and not just to replace Hadoop and doing ETL (extract, transform, load). “This kind of Lake House patterns we’ve seen emerge more and more and we wanted to double down on it.”
Spark 3.0, which is launching today soon, enables more of these use cases and speeds them up significantly, in addition to the launch of a new feature that enables you to add a pluggable data catalog to Spark.
Delta Lake, Ghodsi said, is essentially the data layer of the Lake House pattern. It brings support for ACID transactions to data lakes, scalable metadata handling and data versioning, for example. All the data is stored in the Apache Parquet format and users can enforce schemas (and change them with relative ease if necessary).
It’s interesting to see Databricks choose the Linux Foundation for this project, given that its roots are in the Apache Foundation. “We’re super excited to partner with them,” Ghodsi said about why the company chose the Linux Foundation. “They run the biggest projects on the planet, including the Linux project but also a lot of cloud projects. The cloud-native stuff is all in the Linux Foundation.”
“Bringing Delta Lake under the neutral home of the Linux Foundation will help the open-source community dependent on the project develop the technology addressing how big data is stored and processed, both on-prem and in the cloud,” said Michael Dolan, VP of Strategic Programs at the Linux Foundation. “The Linux Foundation helps open-source communities leverage an open governance model to enable broad industry contribution and consensus building, which will improve the state of the art for data storage and reliability.”
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Alibaba unveils Hanguang 800, an AI inference chip it says significantly increases the speed of machine learning tasks
Alibaba Group introduced its first AI inference chip today, a neural processing unit called Hanguang 800 that it says makes performing machine learning tasks dramatically faster and more energy efficient. The chip, announced today during Alibaba Cloud’s annual Apsara Computing Conference in Hangzhou, is already being used to power features on Alibaba’s e-commerce sites, including product search and personalized recommendations. It will be made available to Alibaba Cloud customers later.
As an example of what the chip can do, Alibaba said it usually takes Taobao an hour to categorize the one billion product images that are uploaded to the e-commerce platform each day by merchants and prepare them for search and personalized recommendations. Using Hanguang 800, Taobao was able to complete the task in only five minutes.
Alibaba is already using Hanguang 800 in many of its business operations that need machine processing. In addition to product search and recommendations, this includes automatic translation on its e-commerce sites, advertising and intelligence customer services.
Though Alibaba hasn’t revealed when the chip will be available to its cloud customers, the chip may help Chinese companies reduce their dependence on U.S. technology as the trade war makes business partnerships between Chinese and American tech companies more difficult. It also can help Alibaba Cloud grow in markets outside of China. Within China, it is the market leader, but in the Asia-Pacific region, Alibaba Cloud still ranks behind Amazon, Microsoft and Google, according to the Synergy Research Group.
Hanguang 800 was created by T-Head, the unit that leads the development of chips for cloud and edge computing within Alibaba DAMO Academy, the global research and development initiative in which Alibaba is investing more than $15 billion. T-Head developed the chip’s hardware and algorithms designed for business apps, including Alibaba’s retail and logistics apps.
In a statement, Alibaba Group CTO and president of Alibaba Cloud Intelligence Jeff Zhang (pictured above) said, “The launch of Hanguang 800 is an important step in our pursuit of next-generation technologies, boosting computing capabilities that will drive both our current and emerging businesses while improving energy-efficiency.”
He added, “In the near future, we plan to empower our clients by providing access through our cloud business to the advanced computing that is made possible by the chip, anytime and anywhere.”
T-Head’s other launches included the XuanTie 910 earlier this year, an IoT processor based on RISC-V, the open-source hardware instruction set that began as a project at UC Berkeley. XuanTie 910 was created for heavy-duty IoT applications, including edge servers, networking, gateway and autonomous vehicles.
Alibaba DAMO Academy collaborates with universities around the world, including UC Berkeley and Tel Aviv University. Researchers in the program focus on machine learning, network security, visual computing and natural language processing, with the goal of serving two billion customers and creating 100 million jobs by 2035.
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Alibaba to help Salesforce localize and sell in China
Salesforce, the 20-year-old leader in customer relationship management (CRM) tools, is making a foray into Asia by working with one of the country’s largest tech firms, Alibaba.
Alibaba will be the exclusive provider of Salesforce to enterprise customers in mainland China, Hong Kong, Macau and Taiwan, and Salesforce will become the exclusive enterprise CRM software suite sold by Alibaba, the companies announced on Thursday.
The Chinese internet has for years been dominated by consumer-facing services such as Tencent’s WeChat messenger and Alibaba’s Taobao marketplace, but enterprise software is starting to garner strong interest from businesses and investors. Workflow automation startup Laiye, for example, recently closed a $35 million funding round led by Cathay Innovation, a growth-stage fund that believes “enterprise software is about to grow rapidly” in China.
The partners have something to gain from each other. Alibaba does not have a Salesforce equivalent serving the raft of small-and-medium businesses selling through its e-commerce marketplaces or using its cloud computing services, so the alliance with the American cloud behemoth will fill that gap.
On the other hand, Salesforce will gain sales avenues in China through Alibaba, whose cloud infrastructure and data platform will help the American firm “offer localized solutions and better serve its multinational customers,” said Ken Shen, vice president of Alibaba Cloud Intelligence, in a statement.
“More and more of our multinational customers are asking us to support them wherever they do business around the world. That’s why today Salesforce announced a strategic partnership with Alibaba,” said Salesforce in a statement.
Overall, only about 10% of Salesforce revenues in the three months ended April 30 originated from Asia, compared to 20% from Europe and 70% from the Americas.
Besides gaining client acquisition channels, the tie-up also enables Salesforce to store its China-based data at Alibaba Cloud. China requires all overseas companies to work with a domestic firm in processing and storing data sourced from Chinese users.
“The partnership ensures that customers of Salesforce that have operations in the Greater China area will have exclusive access to a locally-hosted version of Salesforce from Alibaba Cloud, who understands local business, culture and regulations,” an Alibaba spokesperson told TechCrunch.
Cloud has been an important growth vertical at Alibaba and nabbing a heavyweight ally will only strengthen its foothold as China’s biggest cloud service provider. Salesforce made some headway in Asia last December when it set up a $100 million fund to invest in Japanese enterprise startups and the latest partnership with Alibaba will see the San Francisco-based firm actually go after customers in Asia.
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Image recognition, mini apps, QR codes: how China uses tech to sort its waste
China’s war on garbage is as digitally savvy as the country itself. Think QR codes attached to trash bags that allow a municipal government to trace exactly where its trash comes from.
On July 1, the world’s most populated city (Shanghai) began a compulsory garbage-sorting program. Under the new regulations (in Chinese), households and companies must classify their wastes into four categories and dump them in designated places at certain times. Noncompliance can lead to fines. Companies and properties that don’t comply risk having their credit rating lowered.
The strict regime became the talk of the city’s more than 24 million residents, who criticized the program’s inflexibility and confusing waste categorization. Gratefully, China’s tech startups are here to help.
For instance, China’s biggest internet companies responded with new search features that help people identify which wastes are “wet” (compostable), “dry,, “toxic,” or “recyclable.” Not even the most environmentally conscious person can get all the answers right. Like, which bin does the newspaper you just used to pick up dog poop belong to? Simply pull up a mini app on WeChat, Baidu or Alipay and enter the keyword. The tech firms will give you the answer and why.
A WeChat mini program that lets users learn the category of cash
Alipay, Alibaba’s electronics payment affiliate, claims its garbage-sorting mini app added one million users in just three days. The lite app, which is available without download inside the e-wallet with one billion users, has so far indexed more than 4,000 types of rubbish. Its database is still growing, and soon it will save people from typing by using image recognition to classify trash when they snap a photo of it. Alibaba’s answer to Alexa Tmall Genie can already answer (in Chinese) the question “what kind of trash is a wet wipe?” and more.
If people are too busy or lazy to hit the collection schedule, well, startups are offering valet trash service at the doorstep. A third-party developer helped Alipay build a recycling mini app (“垃圾分类回收平台”) and is now collecting garbage from 8,000 apartment complexes across 11 cities. To date, two million people have sold recyclable material through its platform.
Ele.me, Alibaba’s food delivery arm, added trash pickup to its list of valet services its fleets offer on top of “apologize to the girlfriend” and dog walking.
Alibaba’s food delivery & local service platform https://t.co/Yh95Bt0DPG just rolled out a “throw out the trash” service for $2. The delivery guy can also “apologize to the girlfriend” on your behalf among other things #DigitalEconomyinChina $BABA pic.twitter.com/C2ey1ePDvJ
— Krystal Hu (@readkrystalhu) June 24, 2019
Besides helping households, companies are also building software to make property managers’ lives easier. Some residential complexes in Shanghai began using QR codes to trace the origin of garbage, state-owned media outlet Xinhua reported. Each household is asked to attach a unique QR code to their trash bags, which will be scanned for sources and classification when they arrive at the waste management station.
Workers at a waste management station in Shanghai scan codes on trash bags to check their source (Screenshot from Xinhua feature)
This way, regulators in the region know exactly which family has produced the trash — although the city’s current garbage regulations do not require real-name tracking — and those who correctly categorized receive a small reward of 0.1 yuan, or 1.45 cents, per day, according to another report (in Chinese) from Xinhua.
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Alibaba-backed facial recognition startup Megvii raises $750 million
One of China’s most ambitious artificial intelligence startups, Megvii, more commonly known for its facial recognition brand Face++, announced Wednesday that it has raised $750 million in a Series E funding round.
Founded by three graduates from the prestigious Tsinghua University in China, the eight-year-old company specializes in applying its computer vision solutions to a range of use cases such as public security and mobile payment. It competes with its fast-growing Chinese peers, including the world’s most valuable AI startup, SenseTime — also funded by Alibaba — and Sequoia-backed Yitu.
Bloomberg reported in January that Megvii was mulling to raise up to $1 billion through an initial public offering in Hong Kong. The new capital injection lifts the company’s valuation to just north of $4 billion as it gears up for its IPO later this year, sources told Reuters.
China is on track to overtake the United States in AI on various fronts. Buoyed by a handful of mega-rounds, Chinese AI startups accounted for 48 percent of all AI fundings in 2017, surpassing those in the U.S. for the first time, shows data collected by CB Insights. An analysis released in March by the Allen Institute for Artificial Intelligence found that China is rapidly closing in on the U.S. by the amount of AI research papers published and the influence thereof.
A critical caveat to China’s flourishing AI landscape is, as The New York Times and other publications have pointed out, the government’s use of the technology. While facial recognition has helped the police trace missing children and capture suspects, there have been concerns around its use as a surveillance tool.
Megvii’s new funding round arrives just days after a Human Rights Watch report listed it as a technology provider to the Integrated Joint Operations Platform, a police app allegedly used to collect detailed data from a largely Muslim minority group in China’s far west province of Xinjiang. Megvii denied any links to the IJOP database per a Bloomberg report.
Kai-Fu Lee, a world-renowned AI expert and investor who was Google’s former China head, warned that any country in the world has the capacity to abuse AI, adding that China also uses the technology to transform retail, education and urban traffic among other sectors.
Megvii has attracted a rank of big-name investors in and outside China to date. Participants in its Series E include Bank of China Group Investment Limited, the central bank’s wholly owned subsidiary focused on investments, and ICBC Asset Management (Global), the offshore investment subsidiary of the Industrial and Commercial Bank of China.
Foreign backers in the round include a wholly owned subsidiary of the Abu Dhabi Investment Authority, one of the world’s largest sovereign wealth funds, and Australian investment bank Macquarie Group.
Megvii says its fresh proceeds will go toward the commercialization of its AI services, recruitment and global expansion.
China has been exporting its advanced AI technologies to countries around the world. Megvii, according to a report by the South China Morning Post from last June, was in talks to bring its software to Thailand and Malaysia. Last year, Yitu opened its first overseas office in Singapore to deploy its intelligence solutions to partners in Southeast Asia. In a similar fashion, SenseTime landed in Japan by opening an autonomous driving test park this January.
“Megvii is a global AI technology leader and innovator with cutting-edge technologies, a scalable business model and a proven track record of monetization,” read a statement from Andrew Downe, Asia regional head of commodities and global markets at Macquarie Group. “We believe the commercialization of artificial intelligence is a long-term focus and is of great importance.”
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Alibaba acquires Israeli startup Infinity Augmented Reality
Infinity Augmented Reality, an Israeli startup, has been acquired by Alibaba, the companies announced this weekend. The deal’s terms were not disclosed. Alibaba and InfinityAR have had a strategic partnership since 2016, when Alibaba Group led InfinityAR’s Series C. Since then, the two have collaborated on augmented reality, computer vision and artificial intelligence projects.
Founded in 2013, the startup’s augmented glasses platform enables developers in a wide range of industries (retail, gaming, medical, etc.) to integrate AR into their apps. InfinityAR’s products include software for ODMs and OEMs and a SDK plug-in for 3D engines.
Alibaba’s foray into virtual reality started three years ago, when it invested in Magic Leap and then announced a new research lab in China to develop ways of incorporating virtual reality into its e-commerce platform.
InfinityAR’s research and development team will begin working out of Alibaba’s Israel Machine Laboratory, part of Alibaba DAMO Academy, the R&D initiative into which it is pouring $15 billion with the goal of eventually serving two billion customers and creating 100 million jobs by 2036. DAMO Academy collaborates with universities around the world, and Alibaba’s Israel Machine Laboratory has a partnership with Tel Aviv University focused on video analysis and machine learning.
In a press statement, the laboratory’s head, Lihi Zelnik-Manor, said “Alibaba is delighted to be working with InfinityAR as one team after three years of partnership. The talented team brings unique knowhow in sensor fusion, computer vision and navigation technologies. We look forward to exploring these leading technologies and offering additional benefits to customers, partners and developers.”
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