Friday, April 22, 2016

Cashing in on Chinese Social Media Fame

Venture capitalists are among the millions now following China’s newest social media darling, Papi Jiang, who last fall began posting short, humorous videos of herself on platforms such as WeChat and Weibo. According to media reports, this Shanghai-based social media celebrity, whose real name is Jiang Yilei, has just attracted RMB 12 million in funding from Chinese VC funds, including ZhenFund, Luogic Show, Lighthouse Capital and Xingtu Capital. Though individuals in China and elsewhere in the world with large numbers of social media followers have for many years been paid by brands to promote their products, this is reportedly the largest ever investment that a VC has made in a Chinese social media celebrity. With 668 million Internet users - 48.8 percent of China’s total population – it would seem that there is a huge potential market for investors and social media stars to tap. We asked CEIBS Assistant Professor of Marketing Chen Lin about which sectors might benefit most from this new investment trend, how social media celebrities can best leverage and monetize their brand value with investors, and their long-term prospects for maintaining their online popularity. Read on for her views.  

Mr. Luo Zhenyu [one of the investors in Papi Jiang] seems to be impatient to immediately monetize Papi Jiang’s popularity. This business is not yet mature enough for that – Papi Jiang has not yet established a clear position for her brand, and the subject matter of her videos varies widely. Luo now seems to be pushing her into the market without any specific sector or audience target. Internet and social media celebrities who enjoy long-term popularity are those who are sector-oriented and know how to target a segmented market and exercise vertical influence through high-quality and continuous content production.

There are very few social media celebrities who are able to continuously create high quality content, they need coaching from their platforms. For example in the US, Youtube has launched a programme called NextUp to provide professional mentoring and training in video production to its most promising content providers.

I think Chinese cyberstars will certainly begin to be more differentiated, more professional, and more focused on creating quality content. We’ve seen many whose popularity has quickly fizzled out. The average life cycle of an online celebrity in China is now only two years; they need to produce continuous high quality content to remain popular.  

I think it would be smarter for investors to put their money into platforms that have the ability to create and nurture social media celebrities, rather than investing in the celebrities themselves. In a recent discussion I had with executives at China’s most popular online video platform, Youku, their concern with online celebrities is that after investing much effort into building a video blogger’s popularity, they can easily abandon the video platform and get their fans to follow them onto their own channels, like their personal WeChat accounts. Platforms like Youku can incubate online celebrities, but they are seldom able to keep them exclusive to their platform and see any long-term monetary benefits. This makes it difficult to create a sustainable and mutually beneficial business model.

One example of successful synergy between social media celebrities and a platform is in the clothing sector. Many Weibo celebrities have enjoyed success selling clothing on Taobao. This is because Taobao’s parent, Alibaba, is able to drive traffic from Weibo to Taobao. Goods recommended by popular Weibo stars are usually best sellers on China’s largest e-commerce platform. Women’s clothing is an RMB 600 billion business in China and analysts say that in 2015, online celebrities accounted for nearly RMB 100 billion of that. This has so far been the most popular way for Chinese online celebrities to monetize themselves. Their counterparts in the US have been more focused on targeting specific sectors, like cosmetics, fashion, and technology. Therefore, they have found it easier to cooperate directly with corporate partners in a more segmented way. For example a US video blogger is more likely to focus on creating content about one area – like cosmetics – and brands in that area will sign them to a deal to feature the brand in their video content.    

In the photo are Papi Jiang and investor Luo Zhenyu


Add new comment