The rapid expansion of mobile internet has been met with an equally transformative force: Artificial Intelligence (AI). This powerful technology is making waves across numerous industries, and marketing is no exceptionIn an exclusive interview, Zheng Xiaodong, CEO of Leo Digital, shared insights on how AI is not merely a tool for content creation but rather an "industrial brain" that can significantly boost productivity in the digital marketing sector.

Leo Digital, a subsidiary of Leo Group (002131.SZ), has been at the forefront of integrating AI into digital marketing since it pivoted from traditional pump manufacturing to the burgeoning digital economy in 2013. Seizing the opportunity provided by the rise of mobile internet, Leo Digital has swiftly transitioned from a lesser-known entity to a leading player in the marketing arenaThis segment has now become a vital growth driver for Leo Group, acting as a crucial second growth curve.

The emergence of AI-generated content (AIGC), especially after the launch of ChatGPT in 2023, has attracted widespread attention across various sectors

In the marketing domain, AI has dramatically enhanced the efficiency of content creation, whether it be text, images, or videosThe impact is far-reaching: AI is not only reducing the cost associated with content production but also instigating a fundamental transformation in how productivity is viewed and achieved across the industry.

Traditionally, digital marketing relied heavily on human effort to match tags to advertisements, allowing for the selection of appropriate labels for targeted promotionsWith the advent of advanced AI, however, the process has been revolutionizedAI's unparalleled computational power enables real-time, efficient matching of tags and content, fundamentally elevating the productivity of marketing endeavors.

Zheng emphasizes the importance of AI as not only a tool for generating content but as an intelligence system that can significantly enhance human capability

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He envisions a scenario where AI assists humans in maximizing output and achieving more efficient advertising execution and operational strategies.

Looking into the latter half of 2023, Leo Digital is set to pivot toward developing an intelligent brain for the digital marketing landscape with the introduction of "Leo Unified," a large-scale model aimed at optimizing budget allocation and advertising efficiencyBy moving away from traditional methods reliant on manual strategy and execution, this innovation seeks to implement smart execution and optimization for advertising campaigns.

To illustrate the efficiency that AI brings, Zheng shares that while a human worker can only manage a few hundred keywords, AI can simultaneously handle an impressive 700,000 keywords, automatically generating an equivalent number of landing pagesThis level of detail and responsiveness far exceeds what human labor can achieve

Furthermore, in terms of bidding strategies, AI can adjust plans in real-time based on market fluctuations, thereby enhancing targeting precision and overall effectiveness.

During the 2023 Double Eleven shopping festival, despite an overall industry downturn, Leo Digital accomplished a 40% year-on-year increase in advertising volume for a major client on the Baidu platform, showcasing the powerful capabilities of AI-driven strategies.

In addition to its advancements, Leo Digital is collaborating with prominent platforms such as ByteDance and Tencent to leverage their large models, like the Volcano Model and Hybrid Model, to refine advertising efficiency across all types of promotional scenarios, thereby improving precision and conversion rates.

Zheng asserts, "At Leo Digital, we don't see AI merely as a channel for content output; we view it as the intelligent brain of digital marketing

By harnessing intelligent systems to assist human operations, we aim to enhance both marketing content and commercial growth, ultimately boosting productivity across the industry."

The company operates primarily through two main divisions: media agency and integrated marketingThe integrated marketing sector encompasses traditional marketing services, whereas the media agency side has emerged in response to the rise of digital platforms like ByteDanceAccording to Leo Group's mid-2024 report, Leo Digital's media agency revenues reached an impressive 81.03 billion CNY in the first half of the year, while digital marketing services generated around 2.82 billion CNY.

Traditional media has relied heavily on fixed advertising placementsIn contrast, new media platforms demand that agencies assist in the promotion of a vast array of clients"With the launch of ByteDance's ‘Giant Mill’ product, we have been providing creativity and advertising services for short videos, thereby facilitating the growth of our media agency business and creating a distinctive ecosystem within the domestic market," Zheng explained.

It is worth noting, however, that although Leo Digital’s media agency revenues have seen rapid expansion, profit margins have been steadily declining from nearly 13% in 2015 to under 4%. Zheng pointed out that “the current high concentration of emerging media leads to a few major outlets monopolizing traffic

Despite swift revenue growth, toxic pressure from upstream and downstream partners has caused profit margins to dwindle.”

To counteract this trend, Leo Digital is dedicated to broadening its AI service offerings and enhancing operational efficiency in a bid to increase profit marginsZheng envisions that AI will steer digital marketing toward a more efficient and intelligent future—streamlining services for small and medium-sized clients could substantially raise profitabilityHe firmly believes that within two to three years, AI technologies will proliferate, further optimizing marketing productivity and boosting corporate profitability.

Zheng also highlighted the potential of mobile large models to become vital platforms for future mobile traffic“For agencies like us, these emerging media platforms offer higher commission ratesOur continued and deepening partnerships with these platforms will provide significant profit contributions,” he noted.

As a prime example, Leo Digital has established a cooperative relationship with Huawei Harmony which has enabled the company to claim a leading position in mobile advertising commercialization