INSIGHTS | Is China’s virtual idol boom a marketing trend with staying power?

Less than six months after Ayayi first popped up on the Twitter-like social network Weibo in May, she had attracted more than 512,000 followers, many of them millennial female office workers. A hashtag of her name has pulled more than 5.5 million views on lifestyle platform Xiaohongshu. A fashion-forward, white-blonde 20-something with flawless skin, Ayayi is still relatable.

She posts about mundane matters like commuting on the Beijing subway or watching grandpas play chess on the sidewalks. Soon a powerful influencer, she snagged deals to promote upscale brands like Louis Vuitton and Givenchy. Somehow, she even has time to work as the digital manager of Alibaba’s Tmall Super Brand.

But then, Ayayi is not human. She is a virtual idol developed by Shanghai-based Ranmai Technology. She is one of over 20 virtual characters trending on Xiaohongshu, receiving lots of attention from fashion names searching for new channels to engage with consumers. With multiple job titles from NFT artist to fashion brand manager, Ayayi has worked with brands such as Sandro, Bose, and Fila. Ranmai Technology, a startup that develops digital human images and storylines, reportedly has a net worth of RMB 600 million (around $93.9 million).

Xiaohongshu, often referred to as China’s Instagram, already embraced an active KOL (key opinion leader) community as an efficient marketing vehicle for brands to promote their products on the social commerce platform. The company is now taking a virtual turn for its KOL strategies.

Xiaohongshu is among a slew of Chinese tech firms scrambling to capitalize on China’s virtual idols boom of the past two years. Early on, virtual idols caught the attention of tech giants like Alibaba and ByteDance.

But will the current buzz prove to be a high watermark for the industry? Or are the virtual idols here to stay?

Bottom line: Virtual idols remain a niche market targeting only a small group of ACGN (animation, comic, game, and novel) fans, although Chinese companies have been developing digital characters for the past decade. The sector is on the upswing this year thanks to technological developments, the coming-of-age of teenage ACGN fans as independent consumers, and China’s recent crackdown on the fan economy due to scandals involving human idols.

“Because China’s digital landscape is rapidly changing, it’s difficult to predict whether virtual KOLs born in the current ecosystems will be able to keep up with the way the digital ecosystem will evolve. But one thing is certain: major Chinese tech companies are all jumping on the virtual KOL bandwagon.”

— Pablo Mauron, partner and managing director of Digital Luxury Group

What are virtual idols?

Virtual idols are computer-generated animated images. Developers use advanced animation and rendering technologies to produce characters with finely detailed facial expressions and body movements. 

While they resemble real human beings to varying degrees, the virtual figures in the “metaverse” may boast even greater diversity. Different forms fulfill different roles. In addition to hiring virtual idols from the West like the fashionista influencer Noonoouri (created by German designer Joerg Zuber) and the freckled “musical artist” Lil Miquela (the brainchild of little-known Los Angeles media startup Brud), China is creating plenty of its own popular and profitable virtual personas.

• Virtual idols have various personas such as singers, bands, KOLs/influencers, and broadcasters. Some are derivatives from existing IPs, virtual counterparts of human idols (e.g., pop star Jackson Yee with his virtual counterpart Qianmiao), or avatars of consumer brands.
• Virtual singer Luo Tianyi is one of China’s most famous virtual idols. The 9-year-old singer with elongated anime-style limbs has more than 5 million followers on Weibo. She has represented such companies as Chang’an Automobile, Huawei, and Shanghai Pudong Development Bank.
• Ling is a persona that combines classical Chinese beauty with contemporary style. She has 422,000 followers on Weibo, and has promoted brands such as Tesla, Vogue, and hip tea chain Nayuki.
• A-Soul, a virtual pop girl group, became an instant hit on Chinese video-sharing site Bilibili after its launch in late 2020. The group, developed by Chinese celeb agency Yuehua Entertainment and Bytedance, has more than 3 million fans across platforms, mostly China’s young anime fans.
• With the development of technology, computer-generated figures have acquired  increasing resemblance to human beings over the years, evolving from 2D animated figures like Luo Tianyi to 3D virtual figures such as Lil Miquela. 
• The trend got another boost due to the growing global interest in the metaverse, an online world where people exist and communicate in shared virtual spaces. (Stay tuned for TechNode’s metaverse feature next week).

Virtual idols as a business

Virtual idols are deployed for various lines of business such as brand endorsements, live broadcasts, and even offline marketing campaigns.

Reggie Ba-Pe is the co-founder of Club Media, an entertainment agency that created virtual punk artist Ruby 9100 and a few months ago launched Shanghai-based virtual persona Maie. Ba-Pe reckoned that virtual humans are expensive, production heavy, and time-intensive.

Virtual idols as a marketing tool: As members of China’s Gen Z grow into independent consumers, they are bringing their tastes and wallets with them. And it’s no surprise that the brands are adapting the latest fads to tap consumers.

• Tie-ups with brands are a main revenue source for virtual idols. The fact of the matter is that brands need to be where their audiences are and audiences are flocking to virtual spaces, said Ba-Pe, speaking from the experience of cooperating with Adidas for a co-branded sneaker “designed” by Club Media’s digital artist and stylist Ruby 9100m. 
• “Younger audiences are shying away from traditional social media and gravitating towards video games and virtual spaces. These virtual spaces will need content, culture, and entertainment just like physical spaces and that’s why we are seeing a global migration into what is being coined “the metaverse,” he explained.
• For the entrepreneur and music producer, virtual humans and idols are a “critical portal” for brands to enter and navigate the metaverse and will be “more important to brands than the other way around.”

A rising industry in figures:

China’s Gen Zers, the country’s digital natives who show a great appetite for  ACGN content, are the major force driving this boom.

• The market size of China’s virtual idol industry increased 70.3% year on year to RMB 3.46 billion in 2020, according to a report from iiMedia Research. The consulting agency expects the market to be worth RMB 6.22 billion by 2021.
• Meanwhile, the scale of virtual idol-related markets, including AR and VR, will reach RMB 107.5 billion in 2021, up from 64.7 billion in 2020, the report says.
• Around 80% of the more than 2,000 netizens who joined the survey have the habit of following celebrities or idols from time to time, and 63.6% of them support and pay attention to the related developments of virtual idols. 
• A dozen virtual idol startups, like Yunbo AI, DeepScience, and Wanxiang Culture, have received fundings this year. Most of the companies are still in early stages, either angel or A round, with investments in tens of millions RMB (about $2 million to $5 million).

Tech giants jump on the bandwagon

Tech giants are among the most avid advocates of the virtual idol trend, together with companies along related lines such as entertainment companies, brands, and media startups. By building virtual idol IPs or cooperation with existing idols, the tech giants try to enrich their existing e-commerce, gaming, and short video businesses with more interesting content.

• Tencent, which already made big bets in the metaverse, launched a virtual idol men’s group based on their game Honor of Kings.
• Bilibili, the acclaimed “spiritual home” of Chinese ACGN fans, is the controlling shareholder of startup Shanghai Henian Information Technology,  developer and operator of Luo Tianyi. Bilibili is also one of the earliest platforms in China to broadcast virtual idol concerts.
• ByteDance got rights to singing girl group A-Soul after entering an alliance with Beijing-based celeb agency Yuehua Entertainment through a strategic investment. A-Soul is the first virtual addition to ByteDance’s pool of celebrity marketers that includes famous singer Wang Yibo. With advanced interactive capabilities, A-Soul has been employed for livestreaming e-commerce duties. 
• Along with ByteDance, Alibaba invested in Yuehua. Alibaba also rolled out virtual livestreamers such as Xiao Dangjia to boost its booming live e-commerce business. The e-commerce giant named virtual influencer Ayayi as “digital manager” of Tmall Super Brand. She launched an NFT digital mooncake with Alibaba for this year’s Mid-Autumn Festival.
• IQiyi is the owner of Dimension Nova, a virtual idol variety show, and Rich Boom, a virtual idol group featuring trendy culture and pop music.

A better choice than human celebrities for brands?

Human celebrities and virtual idols do not cannibalize each other, according to Mauron. Ba-Pe of Club Media agrees: “Virtual idols are about as much a threat to human KOLs as Coke Zero is to Diet Coke … Virtual idols are not threats to human ones at all.” 

Still, virtual idols as influencers have pros and cons for marketers.

Pros:

For brands, a less risky choice than real idols:  The volatility of working with humans has been on full display this year after several celebs fell from grace due to scandals ranging from alleged tax evasion and sexual assault to sharing opinions out of step with ruling Party ideology. This leaves virtual idols as less risky choices. 

Full tailoring: The content to be broadcast can be tailored to meet the needs of brands on every level. Idols can achieve things that real people cannot, and their images can be wholly controlled.

Extensive application scenario: The application scenarios for virtual idols are more extensive. Virtual figures are more accessible to fans for one-on-one interaction, usually of the chatbot level of complexity. Moreover, they can be present 24/7 on multiple sites.

Cons:

Legality for business endorsement: Virtual idols’ partnerships with brands work under cooperation agreements similar to endorsements. However, China’s Advertising Law bans endorsers, legal persons or organizations, from endorsing goods or services they have not used or received. 

• There are still questions about whether virtual KOLs can be classified as endorsers, or whether brand-virtual KOL collaborations fall within the scope of advertising.
• “There’s still room for interpretation when it comes to the legality of the matter,” said Mauron. 

Relatability: While virtual KOLs sound good on paper, DLG’s Mauron notes that digital personas may not have the same kind of personalities and color as human KOLs, making it harder for consumers to relate to them. “Without that element of relatability, it might also be more difficult to generate conversions with these virtual KOLs,” he said.

The virtual world is not immune to real-world problems. The data-faking issue that’s prevalent in human celebs’ metrics is also applicable to virtual idols. A Deloitte report reminds all organizations that wish to deploy avatars of the need to pay great attention to privacy and ethics issues.

Conclusion

It’s still too early to say whether virtual people will be marketing mainstays or passing fad.  But given the digitization of almost every cultural touchpoint, experts we talked to expect it is here to stay in some form. 

“Clearly, we are moving towards an increasingly digital future, rich with entertainment in these digital worlds. Regardless, if you’re an idol or a fan, the only way to engage with these new digital realms will be via an avatar.” said Ba-Pe.