How the crackdown on China’s top influencers is shaking up the once-booming live-streaming e-commerce industry
- There are signs that the curtain is falling on China’s top live-streaming stars amid Beijing’s increased scrutiny of non-state centres of influence
- China’s total of 344 million live-streaming viewers in 2016 doubled to 703 million by the end of last year, but the pace of growth is slowing
A week after Singles’ Day last year, analysts asked Alibaba Group Holding chief executive Daniel Zhang Yong if he thought the company relied too heavily on its top live streamers to generate sales during the annual online shopping extravaganza.
Zhang did not answer the question directly, but said Alibaba’s Taobao Live platform treated all online influencers – big and small – fairly.
Fast forward to today and Zhang’s silence on the question speaks volumes. Diantao, the e-commerce giant’s live-streaming e-commerce app, fell behind rivals Douyin and Kuaishou in sales during the midyear online shopping festival on June 18 after losing its top two influencers.
Austin Li Jiaqi and Viya, who represented their clients via Alibaba’s Taobao Live platform, were once formidable selling machines, promoting everything from lipstick to cars and even rocket launches.
Together they sold about 20 billion yuan (US$2.98 billion) of goods on the first day of the 2021 Singles’ Day shopping festival last November – equal to about twice of the annual sales turnover of China’s largest department store chain.
Alibaba, which owns the South China Morning Post, is credited with making Singles’ Day into China’s biggest annual online shopping festival.
Alibaba did not immediately respond to a request for comment.
Li and Viya, whose real name is Huang Wei, came from humble beginnings, but become the most recognisable faces of China’s e-commerce boom, representing the endless possibilities China internet can offer.
Li, 30, was a former cosmetics salesman while Huang, 33, owned a clothing store. After jumping into live streaming, they quickly won wealth, fame, and even honorary political titles, motivating millions across the country to follow their lead.
A new business model was even created based upon their popularity. Douyin, the Chinese version of TikTok, developed an army of influencers to enable it to tap into the e-commerce market, while rival short video app Kuaishou boasts its own top influencer, a 32-year-old salesman called Xinba. Influencers became the magic weapon platforms used to compete for the attention of the country’s 1 billion online consumers.
But there are signs that the curtain is falling on China’s top live-streaming influencers amid Beijing’s increased scrutiny of non-state centres of influence and their “irregularities” in areas like content and taxation.
The first big crackdown came in the form of a tax investigation. Viya, who live-streamed almost every night, even on national holidays, was fined a record 1.3 billion yuan for tax evasion. Literally overnight, her live-streaming room and social media accounts, with millions of followers, were erased.
Similar tax evasion fines, and subsequent erasure of their online presence, befell other influencers like Zhu Chenhui and Lin Shanshan, who were each fined tens of millions of yuan last November.
“Since late last year, we have been thinking that maybe the era of the live-streaming industry dominated by top-tier influencers may end … but we never expect it happen so quickly,” said Franklin Chu, US managing director of Azoya, a company that worked with Li and helps international brands expand to China. “Platforms are [now] helping small and middle-sized influencers instead of using all their resources to create another top-tier influencer,” Chu said.
New faces will have a better chance of fame now that the top players are gone, according to analysts. “In the past, small and medium-sized live streamers had little chance to gain popularity, as the top three live streamers on Taobao Live took the majority of the market share,” said Ashley Huang, an analyst at research firm Frost & Sullivan.
Beijing’s check on the power of top influencers comes as China’s overall consumer spending, including e-commerce, shows signs of weakening amid a broader economic slowdown. The country’s 344 million live-streaming viewers at the end of 2016 doubled to 703 million by the end of last year but the pace of growth is slowing, according to data published by China Internet Network Information Centre.
With the silencing of its two top influencers, Alibaba’s live-streaming platform has been hardest hit. Diantao, Taobao’s dedicated live-streaming app, fell behind ByteDance’s Douyin and Kuaishou Technology in terms of gross sales during this year’s June 18 shopping festival, according to Syntun Data, a third-party market intelligence firm. No influencer from Taobao made it into the top five live streamers in terms of sales, and Kuaishou host Dandan topped the chart by selling 1.6 billion yuan worth of goods and services.
That was in stark contrast to last year’s June 18 event, when Taobao’s live streamers dominated the top-five rankings, led by Viya and Li with 5.9 billion yuan and 5.4 billion yuan in sales, respectively, according to Syntun Data.
According to research firm YipitData, the absence of Li and Viya created “tailwinds” that helped influencers on other platforms like Kuaishou. However, Kuaishou has not escaped controversy, with its top influencer Xinba having been banned for three months after Guangzhou’s market watchdog found he had promoted a fake sugar and water version of bird’s nest, considered an expensive Chinese delicacy.
As Beijing imposes stricter regulation on live streaming and overall online sales are slowing, some Chinese influencers are trying to export their business model to overseas consumers.
Chen Xi, a Shanghai-based live streamer, said some in the industry are considering switching to overseas live-streaming apps operated by Chinese firms.
“I have some friends who almost joined Li’s own company, but switched to TikTok [after he stopped live-streaming],” she said. ByteDance is leveraging the popularity of its short video app TikTok to try and crack the overseas e-commerce market, and is building up the business in the UK, US and Indonesia.
The abrupt demise of Li and Viya as leading players in China’s live streaming industry also serves as a cautionary tale for others. Both influencers had tried to win recognition and favour from the authorities by actively supporting Chinese government initiatives in areas such as poverty alleviation and rural development.
Li, for example, was involved in the government’s push to help farmers sell their crops, joining state media People’s Daily in a live-streaming session last December to promote jasmine tea and raisins.
A member of the Shanghai Youth Federation, Li was awarded the May 4th Medal, one of the highest honours for young people, by the Shanghai government, and received a national award for his work ethic and social responsibility from the Communist Youth League of China.
Viya was officially recognised as an outstanding individual in combating poverty. She was also a member of the state-backed All-China Youth Federation.
Chu noted that live streamers like Li and Viya used to be very important sales channels for established brands and small foreign brands wanting to break into the Chinese market, but that they faced price pressure when dealing with the top influencers. “When we used to work with them, they all wanted a very good deal [on the original market price]. That means brands needed to sacrifice some bargaining power,” Chu noted.
“But if we work with smaller influencers, even if the cost is not that high, we need to spend more time evaluating the actual sales impact,” Chu said.
Li Chengdong, chief executive of e-commerce consultancy Dolphin Think Tank, said he expects the live-streaming industry will be “on the skids” after the demise of the top players. “The demand still exists but fewer young people will rush into the industry to become [the next] Viya or Li Jiaqi,” he said.