China is a global leader in influencer marketing, with the market for key opinion leaders (KOLs) – the more common term for influencers in the Chinese context – reaching RMB 340 billion (£41 billion) in 2021. The Covid-19 pandemic has significantly increased the amount of time people spend online, and KOLs have become a crucial part of successful marketing in China, with Chinese consumers ranking the opinions of influencers such as live streamers almost as highly as recommendations from family and friends when it comes to making purchasing decisions.

Li Jiaqi competing with Alibaba’s Jack Ma to sell the most lipsticks during a live stream (captured from Youku)

Austin (Jiaqi) Li: Big isn’t always better

Taobao Live followers: 73.4 million

Known by the moniker “the lipstick king” after selling more than 15,000 lipsticks in five minutes on Taobao Live, Austin Li is one of the most prominent faces of China’s live commerce revolution. The former shop assistant first gained fame for his marathon live streams, where he would apply hundreds of different lipsticks, and he soon became Taobao Live’s most lucrative seller, playing a key role in the rise of shopping festivals like Singles’ Day and 618. In 2021, Li was one of the few Chinese people to be included on the Time 100 Next list.

The charismatic star’s selling power has attracted many of the world’s biggest brands, including NARS, Hilton, and Coach. However, the success of major streamers like Li has drawn increased scrutiny from the authorities and led to several uncomfortable scandals.

Li became a cautionary tale in early June 2022 when one of his live streams abruptly went off the air after he presented an ice cream cake resembling a tank the day before the anniversary of the Tiananmen Square protests (although his team blamed the outage on technical issues). Li was nowhere to be found on social media for several months, before making a triumphant comeback in the run-up to Singles’ Day 2022, with his first stream clocking up over 50 million viewers.

His successful return put paid to speculation that the era of the live streaming megastar was over; however, his absence served as a reminder that hitching your brand’s bandwagon to an internet celebrity can leave you open to being tainted by association if a scandal ensues. Moreover, while working with a superstar like Li can help raise demand for hero SKUs for brands with an established presence, it is unlikely to be an accessible strategy for brands that are still building awareness, which may be better served working with smaller KOLs on platforms like Xiaohongshu.

A Kuaishou video from Dandan advertising a live stream for the 618 shopping festival

Dandan: The importance of multi-platform coverage

Kuaishou followers: 86.3 million

China’s e-commerce ecosystem – traditionally dominated by Tmall and JD.com – is becoming increasingly fragmented, with social commerce platforms like Douyin, Xiaohongshu and Kuaishou representing an ever-growing proportion of total sales. Short video platforms, in particular, are seeing massive growth, with China Skinny reporting that Douyin and Kuaishou’s combined sales in Q1 of 2023 made up 97% of the value of all sales on Tmall, with fashion and personal care and cosmetics demonstrating particularly high merchandise values.

Kuaishou KOLs like Dandan may not attract as many column inches in the West as superstars like Li, but they have immense selling power. Trendy, fast-talking Dandan reportedly generated a staggering 17.8 billion units of gross merchandise volume in 2022, becoming Kuaishou’s top seller.

Unlike many KOLs, who tend to focus on one product category, Dandan and other top sellers on Kuaishou hawk a wide variety of items, from litre bottles of soy sauce to mid-range cosmetics brands. This appeals to Kuaishou’s user base, who tend to be located in 3rd or 4th tier cities and are looking for discount prices as much as branded products. As a result, Kuaishou KOLs can be a useful tool for testing the waters outside of big cities like Beijing and Shanghai, and often have lower fees.

Ayayi in a campaign for a contact lens brand (Photo:@ayayi.iiiii/Instagram)

Ayayi: Is it better to go virtual?

Real-world KOLs are facing increasing competition from an unlikely source: virtual influencers. “A virtual influencer is a computer-generated fictional character who has the realistic characteristics and personality of a human. They can be used for a variety of marketing-related activities and are becoming a real force in the influencer marketing industry,” explains Arnold Ma, CEO of digital creative agency Qumin.

One of China’s best-known existing virtual influencers is the so-called ‘meta-human’ Ayayi, created by Ranmai Technology in May 2021. Hoping to capitalise on the virtual idol, whose debut on Xiaohongshu attracted more than two million views and garnered over 95,000 likes, Alibaba ‘hired’ Ayayi as a digital manager for Tmall Super Brand, where she curated campaigns and even created NFTs.

Virtual influencers tap into the desire for novelty among Gen Z Chinese consumers, as well as their willingness for the latest tech to be integrated into their day-to-day lives. Using a virtual influencer can show that a brand is forward thinking.

From a business perspective, virtual influencers could be less risky than traditional influencers, especially in the wake of scandals like the one that embroiled Li Jiaqi in 2022. “Virtual influencers … reduce the risks of general agency operation issues and PR crises for IP owners and brands,” says Robin Liu, co-founder of Influencer Hub International. So while they may not be able to build ‘authentic’ or ‘emotional’ relationships, they can be effectively programmed to fit in with a brand’s aesthetic or values without the risk of dealing with a chaotic celebrity personality.

The CBBC view

Working with KOLs should be a key part of any consumer brand’s marketing strategy in China. Still, with potentially huge amounts of money at stake, it is worth considering whether engaging a major KOL is the right approach.

Many brands are increasingly finding success working with mid-size KOLs or micro-influencers (content creators with a small but highly-engaged following in a niche segment, sometimes referred to as Key Opinion Consumers (KOCs) in the Chinese context, especially if they are new to the market.

Brands should also consider cultivating owned channels on platforms such as Douyin rather than relying entirely on third-party creators. This removes the risk of becoming embroiled in a scandal if controversy arises around a popular KOL while also giving the spotlight to the people who know the most about your brand. When tied together with product seeding via more-established KOLs, this creates a more well-rounded, sustainable brand strategy.

China Consumer 2023

This article was produced as part of a series for China Consumer 2023.

Learn more about CBBC’s flagship consumer event of 2023 here.

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The introduction of the Beijing Action Plan for Promoting the Innovation and Development of the Digital Human Industry back in August means China now has its first action plan setting out special policies designed to support the development of digital humans (also known as meta humans). It lays out Beijing’s ambition to become a national vanguard in a burgeoning new field, which is set to hit a market scale of RMB 50 billion (£6.21 billion) by 2025.

The domestic Web3 race is already on, with Shanghai revealing its own blueprint for the metaverse and development of relevant technologies in January, envisioning revenue of RMB 350 billion (£43.48 billion) from the sector by 2025. Beijing’s acknowledgement of this sector and its impact on the development of the wider digital economy has furthered its significance, and more importantly, signalled China’s intention to set standards in the emerging sector.

As a front-end application in the commercialisation of Web3, which is a new iteration of the Internet – think buzzwords such as decentralisation, metaverse and blockchain technologies – digital humans are viewed as a “certainty amongst Web3’s uncertainties”. As a result, the segment has naturally become the focal point at this preliminary stage of China’s wider building of a Web3 economy.

Although an outright definition of digital humans is not provided in the plan, the Beijing Municipal Bureau of Economy and Information Technology (the authority that issued the plan) describes the technology as “a digital anthropomorphic application,” which is a “core technology” in the Web3 ecosystem. To date, applications of this concept in China includes virtual influencers such as Ayayi, Liu Yixi, and Ling, covering practices ranging from brand marketing campaigns to live streaming and AI sign language presenting.

The employment of digital humans in the entertainment industry has also seen significant growth, with the local Beijing authorities seeking to accelerate the innovation of performative virtual beings, speeding up their review process for recreational activities such as TV shows, concerts, movies and live streams. This is well aligned with the city’s other aspiring project that aims to turn two to three local districts into “high quality” bases for live streaming e-commerce by 2025. These efforts are coupled with support for new “boutique” digital human IPs, as well as facilitating brands in adopting virtual humans in their marketing practices.

In addition to the entertainment side, in the foreseeable future, Beijing residents can also expect the presence of digital humans in online smart banking and offline customer services, as well as places of interest and other cultural attractions, as Beijing looks to push the wider application of digital human beings in various scenarios including finance, business and hospitality.

However, as much as there is a determination to drive the growth of the sector, some think the government is intending to further rein in the tech industry by leveraging the domestic hype for digital humans, according to analysts quoted by Rest of World. These intentions have been signposted in the plan, with an emphasis on personal information security and “positive energy” – a universal term for politically correct, feel-good content – which were also cornerstones in China’s crackdowns in the tech and entertainment industries.

Like almost all user-facing applications in China, users of any new Web3 technologies are likely to be required to tie their digital personas to their real identity via the so-called real-name verification process. The rationale behind this, on one hand, is to deter scams, misinformation and other harmful actions that users could perpetrate against on another.

However, as Hanyu Liu, an analyst of China’s metaverse and gaming industries at Daxue Consulting explains: “On the other hand, it means any data the platform collects by anyone playing or interacting with a digital human are all tied to a user’s real-life identity.” This allows the authorities to scrutinise users’ activities in the new online space, centralising what is believed to be a “decentralised” ecosystem.

This approach will then aid the government in maintaining its overall control amid the transition into the digital economy considering the broader installations of virtual beings in some of the country’s core sectors. Additionally, it would pave the way for China to build another digital landscape that is different from the rest of the world in the ongoing global metaverse race.

Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can further help you identify the best e-commerce platform for your brand and target market in China.

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China is a global leader in influencer marketing, with the market for key opinion leaders (KOL) – the more common term for influencers in the Chinese context – reaching RMB 340 billion (£41 billion) in 2021. The Covid-19 pandemic has significantly increased the amount of time people spend online, and KOLs have become a crucial part of successful marketing in China. Today, Chinese consumers rank the opinions of influencers such as live streamers almost as highly as recommendations from family and friends when it comes to making purchasing decisions.

However, with so many companies using paid influencer partnerships to promote their products or brand, some Chinese consumers are starting to get tired of the same old influencer content. As China’s technology sector continues to develop rapidly, some have suggested that digitally generated ‘virtual influencers’ could be the future of influencer marketing in China and beyond.

What is a virtual influencer and how are they used?

“By definition, a virtual influencer is a computer-generated fictional character who has the realistic characteristics and personality of a human. They can be used for a variety of marketing-related activities and are becoming a real force in the influencer marketing industry,” explains Arnold Ma, CEO of digital creative agency Qumin. Famous Chinese virtual influencers include Ayayi, created by Ranmai Technology, and vocaloid Luo Tianyi , who has even performed in concert with Chinese pianist Lang Lang.

Unlike real-life influencers, virtual influencers are AI-powered, meeting the expectations of Chinese consumers for the latest tech to be integrated into their day-to-day lives. Experts predict that the engagement rate of virtual influencers could be three times higher than that of their human counterparts, and the market is expected to be worth RMB 1.5 billion (£182 million) by 2023.

Virtual influencer Ayayi (image captured from Instagram @ ayayi.iiiii)

Virtual influencers may be unable to build ‘authentic’ or ‘emotional’ relationships for themselves, but since they can be effectively programmed to fit in with a brand’s aesthetic or values, the possibilities with a virtual influencer are endless. “Virtual influencers increase the imagination and diversity of the influencer ecosystem. They could be an animal or a cartoon character, which would provide more potential for the format of content creation and business collaborations,” says Robin Liu, co-founder of Influencer Hub International.

What are the risks and rewards of partnering with a virtual influencer?

Marketers believe virtual influencers could be less risky than traditional influencers, especially in the wake of several high-profile celebrity scandals in China, including China’s ‘Queen of Live Streaming,’ Viya, being hit with a £160 million fine for tax evasion. “Virtual influencers … reduce the risks of general agency operation issues and PR crises for IP owners and brands,” says Liu. In addition, virtual influencers give brands more creativity and flexibility as shooting campaigns become less time-consuming.

However, as Ma comments, “virtual influencers could cause people’s self-esteem to plummet as most virtual influencers have [a] perfect appearance and body shape.”  Brands that work with virtual influencers that have been created to fit in with a very tight set of beauty standards could find themselves accused of encouraging negative body image or disordered eating.

Angelababy with her virtual alter-ego, Angela 3.0 (image capture from Weibo @Angela3-0)

Beyond the social implications, the cost of creating or using a virtual idol is not cheap. Although they do not need to be paid a salary, money is needed to develop or recruit an established virtual influencer through an agency. Ma adds that the cost can stretch to several hundred thousand RMB, and if brands consider developing their own virtual influencer, it could reach over RMB 3 million (£356,000). Creating a virtual influencer is a long-term investment, but if executed successfully, such an approach has inherent advantages because it allows brands to add value and demonstrate their technological prowess too.

Partnering with an influencer can certainly translate to increased sales, but as technology moves on, influencers may find it difficult to directly compete against virtual humans, especially when it comes to social media content. Indeed, some influencers have already collaborated with virtual partners. For example, at its pre-autumn 2021 fashion show, Dior created a virtual double of its regional ambassador, Angelababy. The virtual version of the actress and singer was a huge hit, with fans praising her virtual outfit.

Will virtual influencers replace traditional influencers?

The reign of the KOL is likely to continue for some time, with successful celebrity endorsements still making huge waves in the Chinese market. “KOLs remain mainstream due to the importance audiences place on emotion building and technology barriers,” says Liu.  However, the traditional influencer model has the potential to become outdated.

Gen-Z Chinese consumers were raised on technology and have a strong desire to experiment and try new things. Therefore, the demand for real influencers might decrease as marketers try out virtual methods. As Arnold Ma comments, “the market is seeing more diversity, with more KOLs rushing into the battleground as well as virtual beings gaining traction, especially in Chinese digital marketing scenarios.”

Brands operating in China in all industries should take note of the rise of virtual influencers and of their impact as metaverse-related marketing gains more traction.

Entering China is a key decision for businesses of all sizes. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can provide you with the platform to unlock your potential.

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