Dear Investors, Greetings! In today's letter, I will focus on generative AI, globalization and overseas business, BlueFocus' development plan for 2024, and our vision for reaching a CY¥100 billion in revenue. Let us begin with AI. I invite you to imagine the industry you are in or your current job. What do you think will happen in the next 5-10 years if we continue along the existing paradigm? As for the marketing industry at this stage, it involves endless cycles of grind and drudgery. Now, imagine things with the new AI paradigm: in 10 years, standing here, we might see a surge of individuals and companies creating new commercial miracles. This is the driving force of excitement in the era of generative AI. Shifting to BlueFocus, over the past year, generative AI has gradually integrated into our daily operations: business models, process improvements, organizational structures, and talent development. More importantly, AI has begun to serve as one of a mindset for decision-making at BlueFocus, a standard of judgment. I believe this AI paradigm in decision-making will truly reshape the new face of BlueFocus, allowing us to "be optimistic despite mistakes” in our AI practice, helping us avoid the pitfalls of short-termism and conceptual traps, thereby more sustainably advancing our "AI²" strategy. Today, BlueFocus' work style is changing for generative AI: the "Human + AI" work model has achieved 100% coverage among all staff. The average daily working hours tally up to about 2,500 hours, with approximately 36% of employees using AI for over 3 hours daily. In the future, we hope that over 50% of our employees will reach over 5 hours of "AI time" per day. This usage time is crucial as it underpins AI cognition enhancement, iterative practices, emergence of AI talents, organizational culture under AI paradigms, and innovation in business models. Today, generative AI is becoming an extension of the marketer's brain, enhancing our creative capabilities: BlueFocus generates thousands of pieces of content daily through AI for our core businesses such as integrated digital marketing, overseas marketing, and intelligent advertising. These creations account for 68% of our client projects, with images making up 25.5%, 26% are from videos, 23% from ads materials, 19.5% from strategy and copywriting, and other materials make up around 6%. With the advent of Sora and other multimodal models, we can anticipate a rapid increase in video content. Today, generative AI is reshaping our production efficiency: visibly speeding up BlueFocus' overall production efficiency by about 50%. Thanks to the quality of prominent international large language models (LLMs), our global business efficiency has improved dramatically between 100% to 1000%, with domestic digital marketing efficiencies improving between 35% to 100%. Today, generative AI is helping BlueFocus generate revenue and foster new business models: AI-powered cross-border e-commerce product design, generative influencers, and generative advertising are all opening up new realms of possibilities. In the future, routine services and repetitive labor will become less important, and the classic service fee model in the marketing industry will be ended and reconstructed. Over the past year, we have created nearly 300 AI marketing cases, with AI-driven revenue reaching ¥108 million CNY. In 2024, we expect this figure to grow by ¥500 million to ¥1 billion, achieving about 10 times growth. Today, we are building our industry models based on LLMs, striving to soon become a foundation for our AI digital infrastructure: in 2023, BlueAI, in collaboration with Baidu, Zhipu AI, Microsoft China, Google, and other major cloud platforms, combined the strengths of these platforms, leveraged scenario advantages, and deepened AI application, released the industry model BlueAI 1.0. BlueAI 1.0 is focused on global consumer insights, scenario-based creative generation, social media creation, intelligent search, and marketing knowledge databases and is now serving key client projects in both overseas and domestic integrated marketing communication, content marketing, and advertising. In 2024, BlueAI will continue to seize technology trends, evolving into a multimodal, multi-scenario intelligent agent (AI Agent), based on industry models to create enterprise-level marketing assistants that empower market insights, consumer interactions, and multimedia content creation. This will further enhance organizational AI and business AI levels. Similarly, today, generative AI is reshaping our organization and culture: on an organizational level, from recruitment to promotion to motivation, AI has been embedded into every aspect of our assessments. Next, we will implement the "No AI, No Bonus, No Promotion" policy more thoroughly. In terms of cooperation, we have deepened our collaboration with the world's finest generative AI companies, including Microsoft, OpenAI, Meta, and Google for global business expansion; Baidu, Zhipu AI and other excellent domestic partners focus on the Chinese domestic market. Embracing AI giants and cooperating with the world's best AI technology is not only BlueFocus' advantage but also the most steadfast choice of BlueFocus' AI strategy. We are acutely aware that the massive transformation brought by generative AI has just begun, and the data mentioned above barely counts as achievements. At most, they are just accumulations of experience on the path of AI advancement. The direction of BlueFocus is clearer and more focused than ever. We will stay highly focused on the marketing industry, aiming to become leaders and creators in AI marketing. Now, let us look deeper into what significant changes will occur in the marketing industry. The marketing industry in China is a trillion-level market, and in this increasingly competitive market, technology algorithms, content creation, creative services, search, e-commerce, and gaming are all seeing significant and nearly insurmountable bottlenecks. Undoubtedly, as the AI ecosystem or LLM ecosystem matures, generative AI will reshape everything. Among these, we can foresee that generative content will replace traditional production methods, and imaginative people will become more valuable. In terms of form, traditional search ads or short video ad models will be completely overturned and reconstructed in the future, with truly context-based real-time generated AI ad formats making their way into the mainstream within 2-3 years. It's worth mentioning that "discriminative AI" based programmatic advertising in the era of generative AI will be reshaped by the "one million faces for a hundred million people" intelligent agent, with personalized ads soon generated by natural language and interacting with users in real time based on their preferences. This is the true meaning of AI Native advertising, a gold mine waiting to be mined. In terms of logic, the generative marketing that breaks traditional marketing funnels is truly coming. In terms of organization, AI Native organizations will represent the most advanced productivity – a highly flat organizational structure, high talent density, strong AI faith, and self-drive rather than institutional drive. I believe these are not too far away. Reconstructing the trillion-level market entails far greater risks and opportunities than we can imagine. For many companies, especially large ones, generative AI puts us once again at the cliff of generational change, with the choice to soar or fall still in our hands, at least for now. With accumulated knowledge and insight, BlueFocus' AI strategy for 2024 is clear. It is focused on continual exploration and practical application. The goal is to let AI generate more cases and increase revenue. The company will maintain an open and genuine attitude. This approach is aimed at collaborating with leading AI companies worldwide. Such collaboration is set to help BlueAI evolve swiftly. The creation of a true AI Native model is underway. This initiative involves organizational innovation: creating teams that are purely driven by AI. It includes structuring processes that are entirely centered on "AI Native." Simultaneously, there is a push to develop AI Native marketing and content with the aim to create new AI Native business models. In essence, BlueFocus remains dedicated to an "All in AI" approach. Moreover, the company is adopting an "AI First" mindset. This philosophy extends from investments and incentives to talent development. AI-related priorities are consistently placed at the forefront. The longer you explore and practice, the more you will believe that generative AI is no longer just the correct concept and direction, but our only long-term path forward. The next few decades will be the era of artificial intelligence. Making AI a part of organizational culture and belief, a decision-making standard, and a singular direction forward is the most important task and mission for BlueFocus. For this, we will continue to stay grounded, continue to humble ourselves, continue to transform, and continue to boldly invest. Next, let's talk about global expansion. About seven years ago, the global expansion of BlueFocus was still in its infancy. Working with our outbound business team, we set several ambitious goals. Our first aim was to bridge China with the global market. We planned to assist 100,000 Chinese enterprises in their global ventures to achieve commercial success overseas. Another goal was to combine advertising with technology. We sought to integrate service expertise, technological innovation, and data analytics. We also aimed to build a team that embodies both global vision and local insight. Our plan included opening 20 new offices around the world. This expansion was intended to bolster our competitive territories. Lastly, we set a target to grow our business to US$10 billion. This growth was envisioned to be a major contributor to BlueFocus' overall hundred-billion blueprint. Today, we have nearly reached the goals we set at the beginning. So far, BlueFocus has helped nearly 70,000 Chinese enterprises reach the global market, many of our clients have grown from small companies to today's unicorns. Our business scale is increasingly close to US$10 billion, and we have also achieved top-ranking market share on various global media platforms. More than half of the planned global offices have been opened, with the Vietnamese company performing particularly well. In the future, looking at the whole world, wherever there is an opportunity, we will open an office there; wherever there is strength, we will also open an office there. The former captures the market advantages, while the latter learns from cognitive advantages. This duality is the decision-making basis for continuing to open overseas offices. Today, BlueFocus' "No. 1 Brand in Global Cross-Border Marketing" has formed scale advantages and business barriers. Although the business volume is already large, it is still a business line without growth concerns for the next few years. We see more and more Chinese enterprises resolutely going to the global market and consider it as a new strategic growth point. In addition to continuing the original business advantages, fostering a new trajectory of growth for overseas business and building new capabilities combined with generative AI are the core focuses of BlueFocus, with a priority higher than scale, and higher than growth. We are very clear that if these two issues are not addressed, our previously accumulated scale advantage will lose its meaning. Only by combining scale, capability, and AI can we unlock the potential of globalization. It is not an exaggeration to say that globalization and generative AI are a perfect match. Overseas, with excellent LLM footing, AI Native business models are most likely to emerge, while our past cooperation with overseas giants can help us take the lead in AI Native advertising and marketing. Currently, we are making many attempts, such as AI influencer business, generative KOC, generative community marketing, and cross-border e-commerce (intelligent customer service, AI product design, AI-powered traffic acquisition), and the results have been very good. We are looking forward to further progress in 2024. In terms of the second growth trajectory, BlueFocus' affiliate marketing, cross-border DTC brand self-incubation, and the data and technology platform business based on overseas small and medium media companies, which all started last year, have completed the 0 to 1 “go to market” phase. We are looking forward to achieving scalable growth and scalable profitability in the coming year by laying a solid foundation for the second growth trajectory of overseas business. The opportunities and risks on the global stage are bigger than imagined, and if there is enough courage and wisdom, there will certainly be extraordinary victories. My view remains the same: one of the missions of our generation and the next is globalization: to experience, to feel, to challenge, to overcome this extremely attractive but uncertain period, and only then can we live up to this life. Finally, let's talk about BlueFocus in 2024 and our hundred-billion blueprint. AI will undoubtedly reshape the future of the marketing industry and also reshape a new BlueFocus. Our internal strategy is very clear: aim for a hundred-billion scale, become an industrial leader in generative AI, combining scale with imagination space. Whether it reaches a hundred billion is not important, the key is to reach a hundred billion with quality, or to reach US$10 billion with quality. Scale is our basic foundation, and AI is our strongest engine. Grasping these two extremely rare opportunities, BlueFocus has an excellent chance to rise to a higher level, even achieve complete transformation, to become a leader in the global intelligent marketing era. In 2024, our revenue is expected to continue to grow significantly, moving towards US$10 billion. However, general revenue growth is not our top concern and not always the best indicator. We are paying more attention to several important factors behind growth: How much is the AI-driven revenue? Can it reach CN¥10 billion or possibly CN¥100 billion in the future? How is the growth of platform revenue with technology and data value? Does the revenue growth bring positive growth in profits or cash flow? At the same time, we will focus on building our core capabilities. BlueFocus' battle lines are very clear and explicit: integrated digital marketing, global expansion marketing, domestic intelligent advertising, and metaverse business. While building core capabilities, each battle line will decisively integrate with AI. The AI era will especially accelerate the virtual-to-real interaction represented by the metaverse for which we have a longer vision. In addition to capability, talent remains the most important pool of potential for BlueFocus, particularly in the AI era. We will accelerate the construction of a talent development program in the AI era. In the era of AI, we are excited to once again revolutionize and redefine the world of marketing! To achieve this, we will keep our feet on the ground, get our hands dirty, and steadily work towards our goals! Pan Fei, CEO of BlueFocus Group April 2024