PayPal's Bottom-Up Clustering Builds Better Semantic IDs Than RQ-VAE

_reachsumit · x · 2026-09-09

PayPal researchers propose a bottom-up clustering algorithm for constructing Semantic IDs in generative retrieval. While Semantic IDs beat arbitrary identifiers like hashes by capturing item semantics, ensuring each ID maps uniquely to a product while preserving downstream-useful structure is hard; prior work appended extra codewords and used residual quantization. The new method preserves local structure in the embedding space, yielding unique identifiers with improved clustering quality and downstream generative retrieval performance (6-page workshop paper).

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