As we move into 2024, the buzz surrounding AI applications and their necessity for global market expansion has reached a fever pitchThe co-founder of Xincheng Capital, Xu Yangyang, articulated this sentiment succinctly: venturing abroad is no longer just a potential business opportunity for AI firms; it is a challenging yet indispensable step towards survival and growth in an increasingly competitive landscape.

Recent data from SensorTower’s 2024 AI Application Market Insights underscores the rapid and significant growth of AI applicationsBy mid-2024, approximately 230 million active users have engaged with these applications worldwide, with revenue surging by 51% year-over-year to an impressive $2 billionForecasts suggest that by the end of 2024, global AI application revenue will hit $3.3 billion, with projections indicating a staggering $18.8 billion by 2028.

With the overseas market maturing and user payment habits becoming increasingly established, Chinese companies find themselves embroiled in a fierce race to stake their claim

Unlike previous trends, the narrative revolving around AI applications going global no longer focuses predominantly on exporting Chinese models and practicesInstead, the challenge lies in adapting and evolving products to thrive in a globalized context.

Consider this: as experts grow impatient for the anticipated explosion of AI applications in 2024, Pixel Bloom’s co-founder voiced that international expansion may offer a solution to this anticipation gapDespite ongoing technical and commercial hurdles—such as inadequate foundational models and difficulties in achieving product-market fit—the more advanced payment behaviors of overseas users present lucrative avenues for growthThe stark difference in market potential between domestic and international arenas is compelling; Xu further noted that the global market could be several times larger than China's, which is leading many companies to explore these uncharted waters.

A revealing report from SensorTower's China Application Going Global reveals that North America is proving to be the most lucrative market for AI applications, accounting for 47% of global revenue in the first eight months of 2024. Europe follows at 21%, with China holding a mere 6% of the total revenue

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This disparity in revenue illustrates the potential for higher financial returns in overseas markets, equipping investors with a more confident footing when it comes to investing in international ventures.

For those looking to penetrate the overseas market, the trend toward monetization has never been clearerA growing number of Chinese AI firms have validated their capacity to attract paying usersLi Kaifu, CEO of 01 Technology, highlighted earlier this year that their overseas productivity applications boast close to 10 million users and are anticipated to generate over 100 million RMB by year's endOther players, like MiniMax, have made headlines with projections of $70 million in net income this year, primarily stemming from its overseas app, Talkie—a point the company has recently confirmed will also include ad-based revenue streams.

As this upward trajectory continues, a broad range of Chinese enterprises have specialized in various facets of AI, such as video generation, image production, emotional companion applications, and productivity tools

According to data compiled from the “2024 November Outbound AI WEB Monthly Active User Rankings” by Feifan Research, over half of the top 23 AI applications with more than 2 million active users fall under video and image generation, while newer segments like code assistance and intelligent search are also experiencing rapid growth.

The landscape is marked by diversity, as major traditional firms like Bytedance coexist with innovative startups like MiniMax, each carving out niches in the overseas AI application ecosystemMoreover, older companies with years of experience, such as Wanjing Technology, and agile startups like LibAI Lab, continue to assert themselves as formidable entrants on the world stage.

However, an examination of market dynamics reveals that many Chinese AI applications are still struggling to establish themselves firmly in various overseas territories

Analysis of the top 100 outbound AI applications indicates that 57 experienced a drop in traffic in November, with a staggering 59.42% decline for the Question AI application from the tutoring service ZuoYeBang.

In light of this fierce competition, expert Pu Shilin pointed out that the AI application sector is currently functioning within a 'burning money' phase as companies ramp up their product offerings rapidlyHe emphasized that this environment necessitates significant investment in research and development as well as marketing to keep pace with evolving user expectations.

Although many Chinese companies are optimistic about tapping into the overseas market’s readiness for consumer spending, it appears that the focus remains largely on building momentum rather than achieving immediate profitability.

The crux of thriving in the global arena seems to lie in understanding user requirements

Xu Yangyang argues that the unique advantages of Chinese AI applications in foreign markets are not yet well-definedDespite the benefit of lower engineering costs, competition from regions like India and Eastern Europe ensures that simply being cost-effective is not enough to secure market viabilityRather, the key to success hinges on uncovering nuanced consumer insights.

As he noted, breaking into large industries requires substantial capital investment and sustained audience engagement, making it challenging to gain a competitive edge over larger opponents in the short termConversely, successfully delivering on niche products necessitates a strong grasp of global consumer demands and innovative ways to encourage customers to make purchases.

Intelick CEO Zhu He suggests that aligning user demands with revenue opportunities is paramount for AI applications venturing overseas

He cites three AI educational software products—Fix AI, Final Run, and Question AI—all of which cater to similar audiences but have different monetization strategiesFix AI's main revenue driver is not merely its writing tool, but rather its capability to help students bypass AI detection software—a clear recognition of the nuanced demands of the market.

Furthermore, independent developers overseas represent an untapped resource for collaborationOften, small teams or part-time developers leverage firsthand insights into local needs to create targeted products that quickly gain traction, sometimes acquiring thousands of users instantlyXu Yangyang highlighted the potential for Chinese firms to partner with or acquire these agile teams, enhancing their product capabilities while capitalizing on established user bases.

Although the push to 'go global' has intensified, investors are raising the bar for return on investment from AI enterprises