Summary of the Chinese News Analysis in Plain Language
This article discusses a very interesting story about internal competition within the Alibaba group: Two almost identical AI-powered healthcare products have suddenly emerged under Alibaba. One is developed by Alibaba Health, called “Hydrogen Ion,” and the other by Ant Group, called “Afu Doctor Version.” The interfaces and functions of these two products overlap by 90%, which means two companies within the same group are directly competing in the AI healthcare sector.
The underlying reason for this competition is that, over the past decade, Alibaba has entrusted all its healthcare operations to Alibaba Health. However, Alibaba Health started with a much higher advantage compared to its competitors. Relying on the resources provided by the group, it has grown for a decade but now its revenue is only half that of JD Health, and its profits are one-third of JD Health’s. It has failed to develop the necessary capabilities to compete independently in the market. On the other hand, Ant Group, which didn’t focus much on healthcare before, has recently acquired companies like Haodf and薄荷 Health, taking advantage of its position in medical insurance payments. This has elevated its healthcare business to one of the five core business areas on par with Alipay, effectively stealing the lead in digital healthcare from Alibaba Health. The old approach of waiting for opportunities and relying on the group’s support no longer works for Alibaba Health.
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Detailed Explanation in Plain Language
1. Why are companies within the Alibaba group competing with each other for business?
The reason behind the two similar AI healthcare products is the struggle for dominance in the healthcare sector. Many people might wonder, “How can Alibaba manage its internal operations so poorly that two teams create identical products, wasting resources?” However, the issue is not negligence; the business strategies of the two teams have diverged long ago. In the early days, Alibaba assigned all healthcare-related tasks to Alibaba Health, while Alipay was primarily used for payments and was not intended to enter the healthcare market. But with the introduction of electronic medical insurance receipts in 2019, hundreds of millions of people started using Alipay for registration, medical consultations, insurance claims, and medication purchases. Ant Group thus gained control of the critical “payment gateway” in the healthcare process. Later, it acquired companies like Haodf for consultations and薄荷 Health for weight and health management, gaining access to doctors, payment capabilities, and insurance products, allowing it to create a complete service chain from consultation to payment without relying on Alibaba Health.
By elevating its healthcare business to a group-level core area, Ant Group is clearly trying to move away from relying on Alibaba Health. The similarity of the two AI healthcare products reflects the competition for control over the entire healthcare ecosystem. The company that can first establish user habits will gain a significant advantage in the future digital healthcare market.
2. Why has Alibaba Health fallen behind despite a better starting point?
Ten years ago, Alibaba Health had a huge advantage: It acquired a listed company in 2014, obtaining exclusive pharmaceutical qualifications and benefiting from Taobao’s 460 million monthly active users, which was 2.7 times more than JD Health’s user base. Its revenue in the first year was 50% higher than JD Health’s. However, today, JD Health’s annual revenue is 73.4 billion yuan, while Alibaba Health’s is only 34.3 billion yuan. The main reason for this gap is the different growth paths of the two companies. JD Health, as a direct subsidiary of JD, has focused on developing its retail capabilities. Since 2007, JD has built its own logistics system, enabling fast delivery of medicines within 30 minutes. This has made JD Health the preferred choice for customers who need to buy medicine urgently.
Alibaba Health, on the other hand, has relied on the group’s support for its growth. Over the past decade, it has been given various healthcare segments, such as Tmall’s health products and medical devices. It has not invested in building its own logistics or supply chain, resulting in poor performance in key areas like delivery speed, quality control, and negotiation power. As a result, customers are increasingly turning to JD Health.
3. Why has Alibaba Health’s growth stagnated despite four CEOs in ten years?
Alibaba Health’s strategy has been inconsistent over the past decade. Four CEOs have each changed the company’s direction: it focused on online consultations and offline pharmacy deliveries during the O2O boom, then shifted to pharmaceutical e-commerce, and later tried the “Three Clouds” internet hospital strategy, only to retract all these efforts after two years. This lack of continuity has led to no significant achievements. The company has never developed its own core capabilities. As a listed company, it has always relied on the group for resources and growth, without investing in building its own strengths. When the resources dried up, it has had to start over with each new CEO and new direction, losing all its previous investments in doctors, service processes, and user habits. Today, healthcare services account for less than 3% of its total revenue.
4. Why does Ant Group have a better chance of success in AI healthcare than Alibaba Health, which has been in the industry for ten years?
Many think AI healthcare simply involves creating an AI-powered chatbot that provides medication recommendations. However, effective AI healthcare requires integrating various services: analyzing health reports, recommending doctors, handling insurance settlements, and delivering medications. Ant Group has all the necessary components: access to thousands of doctors through Haodf, payment capabilities through Alipay, and its own insurance business. It has also acquired companies that provide daily health management services, effectively creating a comprehensive service chain. In contrast, Alibaba Health’s “Hydrogen Ion” product is an isolated tool that doesn’t integrate well with its main businesses, making it ineffective compared to Ant Group’s ecosystem.
5. What’s the lesson for companies that rely on external support?
Alibaba Health’s story serves as a cautionary tale for large companies that rely on external resources to grow. When they launch new businesses, they often gain a quick start but fail to develop essential capabilities. Once the resources dry up, they lose their direction. This is especially true for companies like Alibaba Health, which has never learned to rely on its own efforts. Without building its own strengths, it will struggle when external competition emerges.