From Matchmaking Brand & KOLs to Reorganizing Show Business: Enter Shang Jing
As the COVID-19 pandemic rages across the world and challenges the global economy, e-commerce livestreaming related industries continue to thrive in China.
Among the companies is Shang Jing (上镜), a Beijing-based startup that uses machine learning to standardize and make more efficient the matchmaking process between brands and internet celebrities (also known as key opinion leaders or abbreviated as KOLs.) Eric Fu, the founder of the company, said currently, the platform has about 1,000 brands and 3,000 registered KOLs.
In the booming domestic social commerce livestreaming market, there are approximately 30 similar platforms, but none work the same as Shang Jing, which operates automatically without any human labor.
Traditionally, the matchmaking takes place in WeChat groups where a platform’s team manually organizes brands in one group while posting brands’ requirements in the other KOL group to finish the matchmaking. However, it is hard for a platform to scale up since the whole process consumes time, human labor and energy while the information is usually typed into excel sheets.
Shang Jing upgraded the model through the use of big data, which forms a very clear and honest picture of what KOLs have done in the past, including their previous transaction history and the types of products they sold. Fu told Pandaily that the process would be free of legal issues, since Shang Jing utilizes third-party application programming interfaces (APIs), through which the company gets sources from e-commerce platforms and social media platforms, as well as permission from the KOLs.
In terms of the matchmaking process, both brands and KOLs can register on the platform currently on an invite-basis. For brands, once their product quality is approved by Shang Jing, they are allowed to post their requirements and product information on the APP. Based on the data of KOLs, Shang Jing’s platform will automatically recommend an appropriate cohort of KOLs to brands so they can send out offers. For KOLs, which mainly belong to the middle-tier, suitable job offers would be dispatched to them and they can choose to accept or refuse. Once a match is completed on the platform, each celebrity will start an automated process to complete their livestream-based transaction.
However, this is far from the main reason why Eric Fu started the business in the first place. As a Harvard alumni and a Chinese American who grew up in New York City, he used to work as a lawyer on Wall Street and lived a content life with an satisfying annual salary of more than RMB 2 million. However, he found the stable environment somewhat monotonous and decided to come back to China to start afresh. Brought up in a family that never received such an elite education as he had, Fu fully understands what it takes to start a company from scratch but he eventually gave it a shot.
Fu recalled that his mother’s side of the family has been working in the entertainment industry and through his observations of show business in China, especially the middle-tier of the market, he figured out where he could fit in. If there is a platform increasing and stabilizing their income, they would be extra willing to try. And for brands, Shang Jing’s algorithm helps them match with KOLs whose viewers have the purchase power and higher conversion rate.
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Fu also expressed his deep concern for the MCN-and-KOL industry. MCN, or multi-channel networks, are a type of institution working with content creators to offer endorsement opportunities, social networks and promotional strategies. “In the U.S., a talent agent charges about 10% of a KOL’s income per year but here [in China], it’s 70% on average. After all their work, the KOLs only puts 30% in their pockets and that’s before tax,” Fu explained. Hence, when speaking of the long term goal of the company, he said he expected to reorganize the business in the next three years.
As a company currently with a seed round of financing, Shang Jing mainly profits from the pure commission system, which earns 5% of the sales revenue of a deal matched via the platform. The brand also gives KOLs, on average, 15% to 20% of the overall amount. For some small-scaled and middle-sized MCNs, the platform serves as a perfect chance for them and their KOLs to make a profit. Middle-tier MCNs signed about 40 to 100 KOLs and they could not guarantee a stable income for the KOLs due to limited resources from and connections with brands. By accessing Shang Jing’s platform, their KOLs can scroll through more suitable job offers and MCNs still profit based on their contracts with the KOLs.
Since its establishment in April 2019, Fu’s company Shang Jing has been bestowed with a variety of benefits and favored by an array of friendly domestic policies, which belong to part of the Chinese government’s plan to attract foreign talents to start businesses in China. Shang Jing’s office is located in Beijing-based Haidian Pioneer Park, an entrepreneurship hub for overseas students in China, where Fu and his 13-person team work in a shared working space rent-free. Various tech and entrepreneurial competitions have also provided cash benefits and windows to communicate with other startups in China. Fu listed the example of OTEC Global Innovation Week, an annual festival bringing international business innovators together to showcase their achievements and exchange ideas, and his team won a 10,000 yuan award this year.
Although Shang Jing is progressing smoothly, Fu still shared some of the challenges he encounters. As coding and algorithms are the core of a technology company, recruiting top-quality back-end engineers is always a priority. However, a startup cannot offer salaries similar to tech giants like Alibaba, Tencent or ByteDance. The team is also looking to increase its business development team, which already have wide connections in the KOL industry as well as a profound understanding of the Chinese market.
For a startup company like Shang Jing, the biggest attraction to employees would be how much they are valued and a shared dream, according to Fu. He also mentioned that for high-level talents, they don’t always see money the same way as fresh university graduates because they’ve been through phases in life and happiness for some of them doesn’t necessarily revolve around wealth.
“It’s not always about the money,” Fu said. “It’s also about a sense of accomplishment and what one can do to change the industry and society for the better.”