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The below notes and transcript are edited by Yalan Wu.
- The creator economy across various livestreaming and short-form video platforms between China and the US has more differences than similarities
- The creator economy in China is better supported by a well-integrated ecosystem and a social acceptance of the live-streaming e-commerce business
- Official stores on platforms such as Douyin, Kuaishou, etc. are mostly integrated with either Taobao or JD.com which are basically the two largest e-commerce giants in China
- Chinese consumers are more receptive to live stream product pitches because they provide consumers with a sense of product authenticity but US consumers are less concerned about product authenticity because they already trust the products to be authentic
- Chinese apps such as Douyin, Kuaishou, etc. have gamified the live streaming e-commerce business which promotes competition between creators to further engage in the sales campaigns
- The US market is more fragmented, for video platforms such as Instagram shopping, etc. to support e-commerce websites they will need to integrate with many different services
- MCNs (multi-channel networks) support creators differently between the China and the US. MCNs in China take a hands-on approach and provide creators with service such as business development, talent development, live-stream set production etc. Whereas in the US MCNs plays a more passive role, serving as conduits between the creators and the video platforms
- In both US and China there is a growing trend for creators to want to own and get direct access to their audience. In the US, this is leading to the growth of websites such as Substack which allow creators to create newsletters directly to their audience
Rui Ma [00:00]: This room is about what can we learn from China’s creator economy? And we’re hosting this as part of Inside Asia, Inside Asia is a club that digs into the people, politics issues, and industries that define the world’s most dynamic continents. It’s actually the first Asia themed club on Clubhouse.
If you want to get more content like we have for you tonight. For tonight, the next hour, maybe hour and a half or so, we’ll be going over the creator economy in China and the US and comparing and contrasting them. We’ll be going over: what the platforms look like on video, short video, live streaming, live audio, such as the one you’re on right now, newsletters and even other platforms.
And then we’ll also go over how these creator platforms monetize and how the creators differ. And we hope to do this really quickly so that you can ask questions. Let’s have our main moderators for tonight introduce themselves, Peter, you want to go first?
Peter Yang [1:02]: Yeah, thanks, Rui, I led creator growth at Twitch and I was on the early live video team at Facebook and Twitter. Definitely very passionate about a creator economy, mostly has me researching the creator economy here in the US but I know everything else, China’s typically a couple of years ahead.
Rui Ma [1:19]: Sophia
Sophia Xiao [1:20]: Hi everyone, I’m Sophia Xiao. I knew Peter and we met at Twitch and I was the chief of staff for a couple years when I was at Twitch, very passionate about giving people- how you make, that’s where world is going. And the other piece that I’m pretty passionate about is Asia in general- is made in Asia and there’s actually a lot of original design or original thinking.
Rui Ma[1:49]: My name is Rui and I actually just recently met Sophia and Peter and we really want to do this room just because of our common passion about the creator economy. I am a small creator myself, I run a media platform called Tech Buzz China. It’s a podcast in English talking about China tech; I’ve also expanded this into a newsletter and community forum, as well as basically consulting service mainly servicing investors as well as operators and trying to bring the best insights from China Tech and of course the creator economy is a huge portion.
I think everyone here probably has heard of live streaming and live streaming e-commerce so we’ll just go straight into it. And the first couple of platforms you want to talk about is in video. I think some of you might have heard that the largest IPO since Uber happened last Friday, and that was the platform Kuaishou, which is basically a competitor to Tiktok in China. So Tiktok doesn’t operate in China but the parent company Bytedance operates Douyin which is the domestic Chinese version of Tiktok in China and Kuaishou is their largest, most significant competitor. And just to give you a sense of how big this company is right now it has a market cap of over $150 billion. And the first nine months of last year, they made $6 billion. And then Peter and Sophia, you guys want to talk a little bit about Douyin?
Sophia Xiao [3:18]: I do know a little bit more about Kuaishou because I actually had a special project being a special advisor to Kuaishou for early part of this year and what I’m really impressed by at Kuaishou is obviously the speed and how fast they iterate. I know that there was a series of conversation about China’s speed. The other piece is actually very interesting, it’s really about how to create opportunities for creators.
And I know that traditionally here, most of the social media and the influencers and creators they are mostly in advertised business, but Kuaishou as a business, their main revenue stream, to start with, was really about tipping and virtual gifting; they’re essentially very similar.
And the other piece is they’re the number two live shopping platform in China, obviously number one is Taobao live and so commerce live streaming commerce is especially vibrant in China. It’s actually a pretty young company that they’re younger than 10 years and huge congrats to their accomplishment.
Rui Ma [4:27]: Yeah, we can talk about Douyin a little bit more later, but as I’ve said, it’s the Chinese version of Tiktok and it’s quite advanced. It’s got a lot more monetization capabilities on the platform, including like we were saying live streaming e-commerce, which will be a big theme for this talk, live streaming e-commerce is something they actually turn on in a big way last October. So previously they were working more with their party platforms, but last October, they instituted sort of their own system which is quite advanced now. And so you can basically shop completely within the platform and in this next month, there’ll be a highlighting their own a payment mechanism, which is really interesting.
And Peter, you had some thoughts about how the US platforms are actually already learning from the China platforms.
Peter Yang [5:19]: Yeah, I think in the US all the major social media companies are very impressed and maybe scared of Tiktok’s growth, and they’re all rushing to add Tiktok style short video feed just like they rushed to add stories maybe a year ago. And I think they’re it’s interesting because they’re using a similar playbook that maybe Tiktok used to enter the US market, which is to throw money at the short video creators. For example, I think Snapchat Spotlight is seen a lot of success there. They’re paying out a million dollars daily to creators, and they recently reached a 100 million monthly active users in January. And I think just focusing on creating buzz and a star making potential of Spotlight versus a more mature platform is what led to their success.
Interestingly enough, I think even though short videos are taking off in the US too, I haven’t really seen people really focused on the live shopping use case or commerce for that matter it’s still mostly monetizing through ads.
Rui Ma [6:15]: In China, there was this really amazing live streaming and 2020 report that came out and there were some stats we thought we wanted to highlight.
Peter Yang [6:24]: When it comes to live streaming in China, first of all, there are over 500 million livestream viewers in China, which is greater than the entire US population. And based on what I’m seeing live streaming in China, it used to be about gaming and like IRL in real life entertainment. And it has shifted towards e-commerce, especially with COVID many businesses in China are giving livestream a try. Total livestream sales will surpass 1 trillion yuan, which is about 150 billion US dollars this year, which is huge. Rui and Sophie, you want to talk about some of the other trends that we’re seeing?
Sophie Xiao [6:58]: One of the things I see is also the connection and collaboration between both offline and online. They really leveraged it during COVID and a lot of the shopping malls as we know that they have the most physical retail, it actually has most challenges during COVID and similarly in China one of the largest shopping malls and many of the shopping malls they actually partner with livestreaming. They turned their stores into sites for creators to use as backgrounds and help them to basically host shows in their store, and this spans from large brands to smaller business in the malls and that collaboration between the offline and online is pretty fascinating and really benefits the economy.
Rui Ma [7:46]: I do want to point out some of these problems with livestreaming, because I do think that a lot of the reports are really bullish, but don’t point out the fact that this industry is getting regulated. That is something investors really do care about and that’s partly because there are issues like fake goods being sold.
Recently there was a big scandal where one of the top live streamers sold bird’s nest, but it really wasn’t bird’s nest; it was just sugar water. So, there’s increasing regulation from the Chinese government on making sure everyone who does live stream has a license and that they’re providing accurate information, consumers are protected and that you can return your products, that there is basically a uniform policy, much like you would expect from offline retail. That has yet to kick in full effect but that is most definitely happening. I do also want to point out that a lot of the numbers that I myself, for example, tweet out, I will try to put the disclaimer, but I don’t know if anyone reads it, is that a lot of the GMV numbers, (gross merchandise volume numbers) that we see from these live streamers are not indicative of net revenue at the end of the day, because they’re usually just shopping cart numbers and they don’t include abandonment, or they don’t include returns, et cetera.
Still, it’s impressive, given all those caveats to say that the top livestreamer last year, her name is Viya on Taobao live, actually her GMV was reported at $4.8 billion. So again, I would take a pretty big haircut off of that, but it’s still pretty impressive given that She is one person with a large team, of course but it is her, it is from her channel and her channel only. I do also want to say that live streaming e-commerce in general fall into two categories. A lot of times it’s used for promotions for new brands. There’s a price like discount factor that drives people to these things so you also do have to take into that account when you consider GMV and volume of transactions. And then I think one thing that’s really different in China is that it’s become so accepted that you see CEOs of really big companies, imagine the equivalent of a Tim Cook or something, also livestreaming their company’s new products. I guess we’ll know that live streaming has made it in the US if the next iPhone is being sold on livestream.
Sophia Xiao [10:14]: Or launched there, right. Viya got a lot of attention in the US because of Kim Kardashian, when Kim Kardashian launched her line in China she went on Viya’s show for about 15 minutes. I think that 15,000 bottles of Kim Kardashian’s perfume were sold in the first three minutes. So, I think that’s Viya and that’s how she got a lot of attention in the West as well.
Rui Ma [10:36]: She is the undisputed queen of live streaming, her numbers are a little atypical, so we don’t want to have everyone here think that everyone in China like gets on a live stream and sells this much.
Sophia Xiao [10:50]: She’s definitely a megastar there, actually to change the conversation a bit, we talk a lot about live streaming and in the US, we actually have been talking about the decoupling of traditional media in the sense the newspaper and journalism and it’s really the rising of Substack.
Peter, I know that you are very passionate writer as well, especially talking about product management, as well as on the topic of passion economy. What are your thoughts there?
Peter Yang [11:19]: I think in the US there is a trend where the creators, they grow their audience on these large social networks, like Twitter, Instagram, and so on, but there’s a trend where they want to own their audience because they want to get access to their fan email address or phone numbers. So that in case they get demonetized or de-platformed, they can still reach their audience. And I think Substack has really grown rapidly based on that, one of the value drivers is that we will let you access your fan email list directly and you can take it wherever you want. The newsletter industry in the US has really heat up Substack is leading, but there is ConvertKit, Ghost and many other viable options.
Now the big players like Twitter and Facebook are also entering the game, I think Twitter especially has really high chance of success here if they can execute because all the writers and all the experts are already using Twitter. So as long as they can, build features to help them get email lists or help them make money, I’m pretty bullish on Twitter in this field.
Rui Ma [12:22]: And I think it’s important to note here that one of the origin stories of Substack is that they drew inspiration from WeChat Official Accounts.
So, going back to comparing us and China and learnings WeChat is the super app that powers much of China’s internet connections, and it has an Official Account system that allows media, publishers, and brands to push messages, multimedia messages directly to users. And now actually WeChat is now increasingly adding video functionality to that.
I actually just did a long interview with a PM friend on this, but basically it is very tightly controlled by WeChat. And what we see actually in China is that people try to get around this by doing WeChat group chats, so effectively you still get that direct interaction and you also build a community and you see not just media companies but brands and influencers. Like Viya that we were talking about earlier, she has all these fan groups on WeChat where it’s up to a 500 person per group and she has an assistant helping her organize fans and pushing out messages and promotions and making sure all her live streams are well attended.
Sophia Xiao [13:42]: I’m just curious here, Weibo and WeChat Official Accounts has been around for a while, have you seen any new trends in that area in China?
Rui Ma [13:55]: Yeah. I think we have some people in the audience that can talk about this, in a little bit when we open it up to the audience, but I think the main thing is that it’s very heavily video now as the feature that WeChat is pushing. So going back to live streaming and content creation, WeChat’s latest updates basically made it so that- actually I guess this has been around for the last year so it’s not even the most recent update, you can now, as long as you have a PRC ID, live stream to anyone.
Now you can also have a separate identity because WeChat is a social network. You can think of it as your, Facebook identity. You can now create a separate identity that does all your live streaming, it’s basically, your more public facing identity, we would think of it as your Twitter identity. You can have both of those on the same platform within the same app using the same tools so that you can leverage your existing social network and then also build an additional incremental audience.
And I think that’s very interesting, I don’t think anyone here in the West is quite trying that we don’t know how well it will work because it’s a relatively new experiment, but that is what’s happening right now.
Sophia Xiao [15:10]: Got it, there’s just so many options in China, there’s the previous version of the YY which is live streaming for gaming, and now comes short form video. And obviously there is the entire ecosystem that built WeChat as a platform as well as the latest live streaming and what I’ve learned is really that ecosystem in China is quite robust.
I think in the US MCN (multi-channel network) is almost a little bit of a dirty word in the sense that for a while they were really popular in terms of investment- that Disney acquisition of maker for example- versus China it’s really their ecosystem. In the US it’s very much about contract management, I would say.
In China the ecosystem is really about business opportunity development, talent development. They were actually really seeking out talent, develop them and actually help create a business opportunity for them. With live stream shopping becoming really popular, there is a whole ecosystem of supply chain as well. It’s actually pretty fascinating to see. And Peter for you as a creator yourself in the US how do you feel about the ecosystem in the US?
Peter Yang [16:21]: I think when it comes to live streaming, it was like really hot a couple of years ago on all the big platforms. I think even to this day in the US it’s still primary game streaming and Twitch that’s leading the way. I think live streaming requires creators to really entertain their fans over a long period of time.
So gaming is definitely like a natural fit, but it was under a potential use cases that are still get to be unlocked in the US. So, for example, I think called Hub House is a great example of live talk shows where people just talk to each other. IRL streaming is really big in China or was really big where you got these cute guys and girls live stream and like a lot of lonely fans watch them and give them tips.
Interestingly enough, only fans have come to capture some those needs here in the US. I think live shopping is still pretty nascent in the US, but you have both big players like Instagram and Amazon jumping, then you also have startups like Pop Shop and Shop Lit live. So, hopefully the US market kind of falls China and live shopping takes off here too.
Sophia Xiao [17:21]: I would say that enhanced ecosystem development, I think in the US, we definitely have robust platforms. One of the differences that I didn’t mention earlier is if you look at the US platforms, they’re very much deep dive into what’s what makes them great.
And in China what you see in terms of platforms are that they are very competitive in that, they want to own everything. They have this concept of public traffic versus private traffic and you can see that the platform itself is developing both public traffic as well as the private traffic to help the creators.
Then there’s the entire ecosystem that’s very massive anywhere from the MCN which includes business development, helping to develop talent, seeking talents all the way to things like services, payments, and even real estate. There are converted warehouses where people can host with different things, they can host their shows as well.
Peter Yang [18:24]: From my perspective, just two points, the first point is I’m definitely really excited to see the creator economy opening up in both the US and China. Creators is all about helping people make a living, pursuing their passion online. And I know in China a lot of students graduated from university and they have trouble finding a job, just like a lot of people in China and not enough jobs.
If we open up a path in China where people can just make a living online, I think that’s really good for the world and for these young people. The only thing I would say is that I’m excited to see the US follow in China’s footsteps and get beyond the advertising business model that all the big social networks use. I just don’t think advertising is really aligned with user interests, so it’s exciting to see the US both large companies and startup getting into subscriptions, virtual goods, gaming, stuff that helps fans helps fans pay the creator directly.
Rui Ma [19:15]: I do think one difference if you’re coming into the room just now and didn’t hear it, is that there’s a lot of supporting infrastructure in China. Whether it be many different platforms or the fact that there are, Sophia was saying, MCNs who go and actually discover content and are really hands-on.
So I’m moving people up now into the speaker’s box. Rafi, you actually do run one of these MCNs, so what were you thinking when we were describing the difference between the US and China MCNs?
Rafi [19:51]: Yeah, I was chomping at the bit, so basically just some background on me. I work for a YouTube MCN which is called Collab Asia, it’s a spinoff of Collab, one of the first-generation US MCNs, multichannel network if you’re not familiar.
I work for a YouTube MCN and I’m in charge of greater China and my wheelhouse is basically taking foreign YouTube content and putting it in China and then also taking Chinese creators and putting them on YouTube. We have direct relationships with almost all the major platforms in China. We work really close with Bilibili, Xigua or Toutiao, which is under Bytedance. We also are working now with Douyu, the video platform, actually going into UGC (user-generated content).
So I can see from my vantage point, a lot of trends in the business models that are developing. So one thing that a lot of people still don’t know is that, except for Weibo and Douyin and maybe a few others, almost all the platforms now have a CPM based revenue source. And so although the rates are much lower than it would be on YouTube, there’s an ability to monetize just from being popular. One of the things I noticed, as you guys were talking, was this emphasis on the latest, hot things, which are like live streaming and e-commerce right.
And live streaming e-commerce that is great, but that actually only appeals to a certain sector. I would say that it doesn’t work in every single case. There are creators who can’t live stream because, I don’t know if they’re doing cartoons for example.
So there’s a lot of creative content, which is being generated, which doesn’t adapt itself to selling stuff or live streaming or at least not very well. For example, a former client of mine, he does bug videos, like he’ll stick – it’s really horrible stuff- but he’ll stick like cockroaches in one of those plastic bins with a praying mantis and see what happens. It’s like educational slash creepy, but immensely popular on YouTube.
He’s based in Hunan but he got himself a VPN puts his stuff on YouTube and there are millions of views on some of his videos. He can’t make a dime in China; he tried to sell insect supplies on Taobao, it didn’t make very much money. Even the CPM based stuff doesn’t make very much money, but on YouTube he can make an order of magnitude higher rates, if not more, from the advertiser-based revenue share that YouTube has. So that’s one key difference, I think because of Google’s ad tech, if you make something that’s interesting that people are going to watch, YouTube will put ads on it. And assuming that it follows all the rules, which is getting harder and harder, but you could just put up a video of a fireplace for 10 hours and if people watched it, you could monetize that. You don’t have to start selling stuff or try to ask people for tips. So yeah, that’s my kind of mantra, Google ad tech supports creativity in ways that doesn’t work with well with a lot of these China-centric business models which are blooming now. Not to evangelize for YouTube,
Rui Ma [23:02]: But it’s a counter argument to the advertising business model. I don’t know. Sometimes I play lots of dog videos or dog music, so happy that someone’s making money off of that. Shin, you had something to say.
Shin [23:20]: So just to give some background on myself, formerly finance and marketing startup, and now I oversee a high-end cosmetics brand in China and in APAC. So, I’ve some brand side experience on the live stream phenomenon. I will say that we’ve done several live streams was actually with Austin, one of the top two live streamers, and Viya was the other one as you guys mentioned, And I would say Austin and Viya are basically a platform onto themselves. Basically, when we look at live streamers from the brand side we look at Austin, Viya and then everyone else. Austin and Viya also almost always guaranteed revenue, everyone else, the return on ad spend is anywhere from 0.2, to maybe like five.
So, if you looking at live streaming as a like revenue platform as a brand, it’s very difficult. When we look at Austin, Austin is very expensive; he has to have the guaranteed lowest prices for that product that you’re selling. When we look at Austin, we don’t really see them as a revenue driver. He’s primarily a low cost and no cost marketing platform, he’ll have anywhere from 6 to 8 million people viewing him every night and then on special holidays, like sales holidays up to 60 million people. So, we see that primarily as a brand building exercise, Austin is basically a platform onto himself. It’s getting to the point and they’re trying to do all these IP extensions to him and his entire team. We actually recently got pitched for live stream with his dog.
Sophia Xiao [24:49]: I wonder how that’s going.
Peter Yang [24:49]: So Shin, you were saying that it’s primarily like a way to build brand awareness is like a top of funnel stuff, right? It might not be a way to make money right away.
Shin [24:57]: Yeah. It’s when we look at it from return on ad-spend we can spend a million RMB on a print ad that drives no sales, or we can spend a million RMB on Austin that will drive 2 to 3 million RMB in sales. And it’s actually going to be seen by 10 million people with the same perhaps readership as the printout.
Sophia Xiao [25:23]: I understand that this is actually a pretty consistent thing that I also heard and learned is that for the top creators, it’s actually very much about brand awareness and the one of the trends in the US and I actually believe that it’s in China as well is it’s actually not by number of followers in terms of trying to determine whether they’re the right spokesperson or influencer or creator for your brand in that case. It’s really about are they the right person for your brand in terms of conversion?
Shin [25:49]: I definitely agree when we look at sort of live streamers and KOLs in particular, we look at primarily the nature of their content and also the sort of makeup of their audience. For instance, we’re more clinically driven, scientifically proven brand. So, we’ll look at the KOLs that are all about like ingredients or we’ll look at the KOLs that perhaps, have a science background too. Like in the United States you have some like skin chem-e and stuff like that. And these dermatologists KOLs. So those are KOLs that we would look at in China as well. It’s very focused on the target audience because the primary reason and the limitations is because they’re so expensive. KOLs in China are so expensive, you can’t really do like a non-targeted KOL campaign, unless you’re a major brand.
Rui Ma [26:41]: Just to give people in the room some context, Austin his name, Chinese name is Li JiaQi; he is the number two live streamer pretty consistently over the last two years. He’s famous for selling lipsticks, so cosmetics in general and last year, according to third-party data, he has about 37 million fans.
It sounds like for some shows, he’s getting greater than that from what Shin said. And his GMV last year was 3.4 billion USD, again, GMV being gross merchandise and not indicative of net revenue.
Shin [27:17]: Yeah, I would say looking at an Austin or a Viya that you would be looking at probably a 20% return, so from GMV, add an additional 20% return value.
Sophia Xiao [27:30]: I can actually introduce Chenyi a little bit, she is known in China as PingGuo JieJie she actually has a really interesting, not only because she’s a great creator and she has a special very admirable social mission about sustainability.
Chenyi [27:41]: Hi, Sophia, thank you for inviting me here. I’m a lifestyle influencer in China with over 200,000 followers across different platforms and I come from a background in marketing. I used to work at Uber and UberEats between US and China and I have been working with brands like Apple, their iPads and Apple watch, Oatley, the Swedish oatmeal brand, Allbirds and Duka. I worked with a lot of lifestyle brands that’s the rising middle class in China are looking into right now. For me, I have WeChat official account, Weibo, and different platforms. We create videos like blogs and also blogs for different brands that bring conversion.
I want to mention that the Little Red Book (XiaoHongShu) is highly considered by a lot of brands when doing a campaign because the conversion rates so far is one of the highest, especially for lifestyle, cosmetics, food and beverage brands. I would say for live streaming it’s more sales oriented for the like lowest price.
Rui Ma [28:57]: Could you describe XiaoHongShu to those people in the audience who don’t quite know what it is?
Chenyi [29:02]: Yes. XiaoHongShu the Little Red Book is a combination of Instagram with direct sales as well as Pinterest combined. It’s like a destination for users to look for lifestyle inspirations for different products for travel destinations. If they want to go somewhere, they will go to XiaoHongShu and look for advices and suggestions on which hotels to stay. If they are looking for cosmetics, they go and search certain keywords. So, the app is on top of people’s mind when they look for lifestyle and related areas. The difference is if you open Tiktok, Douyin, or Kuaishou, you are looking for entertainment and maybe you are not there to just buy things.
Rui Ma [29:52]: Yeah. A lot of celebrities are on it showing off their product-oriented recommendations. Famous actresses showing off their skincare routines versus on Tiktoc, for example, they’re probably doing some entertainment content.
Peter Yang [30:06]: I think the other thing that it was different between US and China is that Chinese people care a lot more about how authentic the product is and live stream is a really good format for showing that. In the US, generally speaking, the products that you buy are generally authentic.
Rui Ma [30:20]: Are there official creator marketplaces, so in China, for example, Douyin and actually on Tiktok as well, you have official creator marketplaces. And in Douyin, you actually have even a lower tier where you don’t have to be a very influential influencer, you can just be anyone on the platform with a thousand fans, which is pretty small, and you go in there and do these potentially paid missions from brands to create videos around their existing campaigns. And they actually gamify it so you can see what other people are making and what the payout has been for other videos in case you need inspiration. You see stuff like that in the us?
Peter Yang [31:04]: I think the fragmentation of the US market is a really big problem. I think the way it works in China is that the official store is mostly integrated with either Taobao or JD.com and these two are basically the two largest e-commerce giants in China that accounts for like 80% or something of the entire e-commerce market share of the country. But that’s not the case in the US, so the US is super fragmented and for something like Instagram shopping or like other platforms to support e-commerce websites they will need to integrate with a ton of different services.
I think that’s part of the reason why it’s so much harder to do things in the US. One example is the Taobao affiliate program, it’s super well done and it’s like way bigger and more successful than an Amazon equivalent. And I think one of the reasons is that the variety of items you can sell on Taobao is just so much bigger than that of Amazon. Amazon is still mostly products that are sold by established brands, whereas on Taobao, obviously you still have all these like large brands, but you have a lot of the smaller emerging brands that are also doing really well and selling on Taobao.
And these are the people who really need the influencers because that’s how they will get the distribution, the exposure. And so there’s this really nice ecosystem going on in China, which is still lacking in the US.
Rui Ma [32:32]: Here we got a question about whether or not proliferation of live streaming was leading to some problems in society, especially with regards to children as promoting consumerism. In terms of the conversations on the ground, I think that there’s always that conversation about are we becoming too materialistic.
In the case of livestreaming e-commerce that’s generally not really been applied just yet, because most of the goods you buy on livestreaming e-commerce is actually on the cheaper side. It’s generally not over consumption in the sense of a conspicuous consumption, right? So you do have the luxury brands doing live streaming as an alternative way of reaching their customers but that’s not really what primarily livestreaming is known for. The AOV on these platforms that we’re talking about is generally $10 or less and single ticket items is well less than that.
Sophia Xiao [33:30]: That latest number I’ve seen is about life live streaming commerce is 9% of the total online sales, right?
Rui Ma [33:36]: Yeah, so it’s not dominant just yet. We just happened to talk about it because a major company IPO last week.
Shin [33:42]: On a positive side, China has already gone through the showing off on social media phase and there’s been backlash. I think it was already like six to seven years ago, there was the daughter of the head of the Red Cross or something like that, showing off on Weibo and got seriously trashed in the media and everything for showing off too much bling. So that’s already happened and society for the most part I could think is projected it in the mainstream social media case.
Not completely, obviously there are still celebrities and models and things like that, but it’s not quite as bad. The west I think is ahead in terms of mental health support for creators. And the other thing I think in China, that’s interesting, and we could probably do chapters on this, China reveres, especially Kuaishou the one that just went IPO, the simple life of the countryside or these second or third tier city people who livestreams or who’s showing like his craftsmanship. We just bought content from a guy who just paves basketball courts and he has this big roller and he goes around; he’s Leonardo da Vinci of black top and so people love to see this. The Chinese word Kung Fu, as in the martial arts stuff, literally means to be a master of a craft, like you put in the hard work and you get good at something.
China actually is plucking these people out from rural or even urban monotony and turning them into stars on social media. So in that respect, it’s still viewed as a positive no one talks about what happens to these people after they become super famous and burnout or whatever. But that’s maybe another topic for another day.
Sophia Xiao [35:32]: Derek, you’re working on creators at YouTube, right?
Derek [35:33]: Yeah. Hi everyone, and thank you Sophia and Peter for inviting me. So quick intro, I’m a product manager at YouTube, like Sophia mentioned, I work on live streaming products as well as paid digital goods. I have two comments and also one question.
The first comment is that where we were before is that creator lifecycle tended to have this pattern of how they made money over time.
As the creator grew and matured, right? So their revenue mix and proportional income from different sources varied over time. But there was a very distinct pattern that near the beginning, these single time payments donations from initial community members tended to deliver the majority of the creator income until the creator was able to build up this core base, larger core base and begin earning more of a recurring predictable income from subscriptions for revenue.
And then there was this flipping point, when the attention scale that creators really commanded with their content turn ads into this viable source of revenue, and oftentimes became the largest source of their revenue on platforms like YouTube. And then lastly, there was this brand sponsorship, affiliate commerce type of aspect that generally tends to be relatively small and irrelevant for a very long time, until much later stage in the creator’s life cycle. And I think that as consumer behaviors change, continued growth of influencer marketing and these new interactive social commerce tools that folks have already talked about are coming into the scene. This trend is like being debunked everywhere and I’m super interested to hear that like a lot of the folks on this call are working to propel that even further. So that was number one.
And the second comment was really around something I observed, a lot of creators, and I’m using the term very loosely here I’m talking about artists, traditional video uploaders, they don’t typically view live stream as a way to make money. They don’t see it as a way to actually grow their audience or make a full-time living doing it. They often view this as an audience engagement tool and so artists don’t see live streams as a way to get these donations, they see it as a way to deepen fandom and to stoke loyalty in their existing fan base so that they can make more money on their primary revenues, which are generally merchandise, live touring, et cetera. And I see this trend across various different verticals outside of music as well.
Sophia Xiao [38:03]: Do you think that this is because the platform itself does not make it easier for them or you think that they just train to have that behavior or you think that’s inherent in what they want to do, meaning that they just want to use that as a more marketing top of funnel.
Derek [38:20]: Yeah, I’m probably a little bit biased in my answer, I think it’s a little bit of both because the tool sets exist, I think Dan could probably speak to this as well, but it’s not perfect awareness and the UX is not always the best. But I think the tools do exist for them to also monetize live streams.
It is typically like they don’t see it that way and oftentimes they have an allergy almost towards being viewed as sellouts. And I think that is a very different cultural thing across China and across the US. We talked a little bit about behavioral differences and trends where China is like ahead of the US. I’m really curious, are there trends where the two markets are just headed in a complete opposite direction? And one trend in particular, Sophia, you actually touched on this that I would love to understand more from the Chinese market is in the West I see this desire for a lot of creators that want to move from platforms where they got discovered, but they rented an audience on Twitch on YouTube, et cetera, to places where they can really own their audience own that communication channel, own that engagement format on that monetization model. Is that a similar trend that’s happening in China?
Sophia Xiao [39:28]: My understanding is in the US where you see is the MCNs, even the brand itself, they actually want to have a direct relationship with the creators. We definitely know that very well at Twitch and even actually the brand itself. In China, the whole ecosystem MCNs, I just think that the only similarities between MCN is really the name. If you’d look at MCNs in the US and MCNs in China, it’s vastly different in terms of how they take care of the creators and how they help the creators.
Rui Ma [40:00]: Are you talking about when creators are leaving the platform or trying to monetize on other platforms or even creating their own platform? Because I guess what I can say is one of China’s largest influencer, Li ZiQi, she’s also really big on YouTube. She’s obviously started her own e-commerce line and I’m a regular customer. The largest influencer on Kuaishou, his name is Simba has threatened to leave and create his own app.
Peter Yang [40:31]: An ecosystem of that happening already, so there’s a platform called EscapeX and they’re powering a lot of these celebrity applications where they are like an enclosed ecosystem just for their super fans. Sometimes, you have to pay to even download the app but oftentimes you get the app for free, but to unlock any of the true value of secret content, early previews, early ticket buying, stuff like that you have to pay.
Male Speaker 1 [41:00]: The trend in the US maybe a little bit longer term but I’ve been thinking recently is there was a desire to move towards more decentralized platforms powered by crypto and the idea is no company or government can come in between you and your fans. I can definitely see it play out in the US.
Rui Ma [41:10]: This is not crypto related, but in China the fan economy, and I think this is true for East Asia generally, but I’m only familiar with China’s the fan economy is huge. Monetizing the most possible through your super fans is a very big business. So there are all sorts of like fan management apps, but beyond that just on all the creator platforms Weibo, etc., you already have internal tools. For example, on Kuaishou you can create a chat groups, if I follow a celebrity within the followers I can do gamified missions and get status within that community. So, it’s very easy to identify who the super fans are.
Male Speaker 2 [41:52]: I used to work in a startup that did talent management and also connected large brands with celebrities and their fans. There’s also a portion of the budget, generally 10 to 20% reserved specifically for the moderators of the fan groups. Because a lot of the monetization, when you get a celebrity is going to be sending it to those specific fan groups. And these fan groups generally are Weibo or WeChat, they might have 5,000 members and they might be like a bunch of different fan groups, but there’s generally 2 or 3 major fan groups that are unofficially designated by the celebrity as the ones that you have to go through to contact their fans and get their fans to replicate the message that the celebrity sends out, because that’s a large part of the engagement that you get is that the fans will spread the message out for you guys for the brand.
Toby Zhang [42:45]: Hey guys, thank you so much for having me Rui and Peter. We’ve known each other for a while, actually Peter and I go back 11 years ago, back in my Microsoft days. Just a quick intro, I used to run a VC firm called CRCM Ventures a number of years ago, we were the first investors to a two-people company called Musically, sat on this board for a while and I guess four years after that they were acquired Bytedance rebranded into something called Tiktok. It was really fun, incredible ride and since then I have been really passionate about the creators’ journey to create a marketplace and to short-form media in general. So recently got really passionate about live shopping and livestream e-commerce, I actually left my day-to-day VC job and started a company called Shop Lit Live here in the US particularly focused on live shopping.
Just two quick points to add, one of the things we talked about earlier in the conversation is the market place difference between US and China. I think something to really quickly bring to light is the penetration of e-commerce. So in China in 2019, e-commerce was around 40% of all commerce and US was only 11% and last year e-commerce was pretty close to 50% of all commerce. In the US it grew more than 50% and it’s still roughly around like 15-16% of all commerce. Amongst that live shopping and social shopping has been a primary driver for growth of overall e-commerce for the last number of years.
A lot of that is also engendered the kind of logistics is really cheap an things can get delivered really quickly and accurately. I think that also speaks to why return rates are so high. I think if you’re an e-commerce company in the US, and your return rates are 5% around there, you’ll be sticker shock. But in China, it’s not rare to see you get a 30% return rates during holiday season, or you do your kind of live shopping shows and lot of people buy at the moment. One other thing I wanted to point out is that the influencer market in general in the last number of years. McKinsey came out with a really good report in 2020, this one point I thought was really resonating was the fact of influencer fatigue. Over the recent years, over 80% of companies have said that they either used or considered using influencer marketing. And we’ve seen over the last three years that there’s 40% plus year-to-year growth in spending in influencer marketing, but engagements have dropped in other directions more than 40% a year. The leading platforms dropping from 4% to less than 2%, I think on Twitter today, it’s like less than 0.05% in terms of engagement. There is this kind of growing trend of influencer fatigue or everyone are so aware that that they’re being marketed to.
I think Instagram in the recent months have also added the paid partnership type of thing. I am a firm believer that livestream shopping or live commerce has a space in this place and that particular, higher form of engagement does in fact drive higher conversion but it’s really about finding where the underserved markets are. It may not start with some of the biggest brands, it may start out with some of the smaller niche opportunities and that’s what I’m focusing on these days.
Rui Ma [46:06]: Just to add on to what Toby said, the rates for e-commerce package courier logistics is so cheap these days; it’s about 1 RMB, so 15 cents, per package. That accounts for the return rates and the return rates during shopping festivals can actually be up to 50%. Our last question is about athleisure brands in China, is it a big thing?
My comment, which is that it’s been big for actually at least a few years, Lululemon I think it’s like huge in China. I have a bunch of friends who try to start various types of athleisure brands and yoga related studios. If that’s a market you’re interested in exploring, I always tell people when they consider China that when you look at the coastal urban, highly urbanized areas which is what I was called developed China, which is about 200 to 400 million people, they’re living much the same lifestyles as you would expect here in the West.
When intermittent fasting was hot, or I guess still continues to be hot, that’s also a big thing in China. Things that you wouldn’t even expect, like microbrews, that’s hot in China, EDM already the second largest music genre in China, etc. I could go on forever, but athleisure is big in China.
Sophia Xiao [47:25]: I work with different yoga and lifestyle brands. Just give you an anecdote, I go to a Zumba studio, I go to a yoga class in Shanghai and all around me 360 degree are Lululemon logos, so there you can see the penetration of Lululemon in China.
Now, I’m in Bali and I go to a very more remote area for a yoga class and I see Lululemon. I think Lululemon is really a big hit in China, it’s very aspirational. At the same time, there are a lot of really good brands coming out of China, like Maya Actives, they cater to the Asian kind of body type and they have lab just researching new material.
Rui Ma [48:10]: Thank everyone for participating and please follow us. We’re already saying that we want to hold like a follow up and dig deeper into some of these comments and topics that we were discussing.
Sophia Xiao [48:29]: Thank you so much everyone. Thank you for sharing your insights with us.
Peter Yang [48:30]: Thank you everyone, our economy is a global economy, it’s really good to see this dialogue between US and China.