Before six female employees from Musiness, a commercial music copyright platform based in Shanghai, started taking turns as a customer service specialist to answer questions from clients through a company social media account, none of them expected that they would be appearing on users’ screens as the same virtual woman. The brown-haired, fair-skinned girl, garbed in a black camisole, goes by the name Metamuse and has been the animated representation of Musiness online for most of this year. Metamuse not only represents the company as a “chief customer service officer”, but also as a singer who can serenade users with tunes like Gongxi Gongxi , a traditional Chinese song celebrating Lunar New Year. The company’s founder and CEO Tong Xiaoyan morphed Metamuse into a virtual human because she believed that metaverse-related concepts would blow up after Facebook CEO Mark Zuckerburg rebranded the company as Meta last October. She also sees virtual humans as carrying much lower risk than real-world celebrities. “You do not have to worry about ‘rollovers’ of their public image,” she said, referring to the Chinese internet slang that describes the sudden fall of public figures due to moral, relationship or tax issues. “And their schedule would be much more flexible than real humans.” “Simply speaking, a new space or area [like the metaverse] first needs people, that is why our current goal is to lay out a matrix of virtual human intellectual property,” said Todd Hessert Jiang, the founder of Beijing-based virtual human developer StarHeir Technology who previously worked in luxury fashion. Since last year, virtual idols have been appearing in Chinese news headlines at an increasing rate. They include Chinese real estate developer Vanke’s virtual employee Cui Xiaopan and Ayayi, China’s first virtual influencer who debuted on the lifestyle platform Xiaohongshu . Another popular one in Hong Kong is MonoC, a virtual artist who sold her NFT artwork via Phillips for HK$189,000 (US$24,146) last month. The market size of virtual humans was about 107.5 billion yuan (US$16.9 billion) in 2021 and is expected to reach 333.5 billion yuan in 2023, rising along with the sophistication of related technologies and broader consumer acceptance, according to a recent report from market research firm iiMedia. The reception to virtual humans in business and social environments is partially a generational issue, according to James Cheng, a senior project manager for the telecommunications, media, and technology sector at global consulting firm Roland Berger. “The Millennial generation in China grew up watching cartoons, which makes them receptive to virtual characters, not to mention Gen-Zs who are digital natives themselves,” he said. These intelligent avatars are also getting a boost from policymakers. China’s central government encouraged the National Radio and Television Administration, the country’s media watchdog, to advance the use of virtual humans in its 14th five-year plan. Inclusion in the country’s top economic agenda came a month after Beijing started a new internet clean-up campaign last summer after scandals related to celebrities such as Kris Wu swept through Chinese social media. These developments have now arrived at an “eruption point”, which Chinese tech companies have been waiting for since they started accumulating virtual human-related technologies two or three years ago, Cheng noted. Despite being hesitant to offer concrete blueprints for the industry’s development, China’s Big Tech firms including e-commerce firm Alibaba Group Holding , internet search provider Baidu , and TikTok owner ByteDance have all jumped on board, trying to fit virtual humans into their own business models. Alibaba, owner of the South China Morning Post , made its virtual human customisation service available to merchants in 2021, enabling brands like Yatsen Global’s Little Ondine to continue to live-stream to users when their human live-streamers are on break. Warner Music joins NFT project to mint virtual superstars in the metaverse Baidu made its business-facing virtual human for sign language services available just this month. ByteDance provides technology support to A-Soul, a popular female virtual idol group under Yuehua Entertainment, which just filed for an initial public offering in Hong Kong on March 8. Making a virtual human is expensive, though. Liu Yexi, a popular virtual beauty expert, reportedly has a team of 100 people behind her. Liang Zikang, the CEO of Liu’s owner Chuangyi Technology, told Chinese media last year that the cost of each second of video with their virtual idol is equivalent to that of “two to three grams of gold”, which serves as a barrier to entry. One of the most common ways of monetising virtual idols is to have them act as brand representatives and appear in advertisements, just like human celebrities. For instance, the five virtual idols under StarHeir have worked with DFS, the duty-free brand under global luxury group LVMH, German audio company Sennheiser and French beauty brand Clarins, among others. Metamuse from Musiness endorsed Chinese delicacy maker Caizhizhai three days after she launched her career in January. Tong, the CEO, said the idea behind the Metamuse was to create a more “professional” virtual singer who releases her own records and music videos, and thus makes money from her copyrighted works. Similarly, StarHeir’s Vince, a virtual music producer, is expected to release his music album with US-based music recording company 88rising, which manages Chinese breakout hip-hop group Higher Brothers. Even though virtual idols are meant to solve problems that accompany human celebrities, these digital stars are not completely risk-free, as they are ultimately operated by humans. The popularity of Kizuna AI, one of the world’s most well-known virtual idols who debuted on YouTube five years ago, declined when the Japanese team behind her designed three new versions in 2019, including one for the Chinese market. Controversy stirred around the idea that the company was trying to reduce its dependence on the original actress, reportedly causing about 200,000 fans on Chinese video streaming site Bilibili to unsubscribe from Kizuna’s channel. The company later decided to indefinitely halt updates to the Kizuna account after an online farewell concert in February. Companies based outside China also have to navigate political minefields when targeting the local market. In late 2020, Japanese virtual idol agency Hololife found itself in hot water after two of its virtual idols listed Taiwan as a country in their live-streams. The company apologised and temporarily suspended the idols, but it got into further trouble when Chinese fans discovered that the company’s apology statement for China included support for the “one China principle”, while its statement on Twitter did not. While their Chinese counterparts have yet to run into those problems, questions of how to sustain popularity and engagement over the long term appears to be an issue for many virtual human developers. Last May, virtual idol Ayayi’s Xiaohongshu profile garnered nearly 3 million views overnight on her first post. Her most recent posts, on the other hand, have only around 100 views each. Some internet users also made fun of the technology and called some of the content fake. “Photoshop skills have got worse,” reads one of the top-voted comments on Ayayi’s Xiaohongshu post about the Winter Olympics. “The human body ratio does not seem to be right. You can make her head bigger next time,” another user wrote. This is in contrast to the popularity that Kizuna seemed to enjoy before her controversy. Human voices, digital faces: the virtual live-stream idols of China Kizuna AI “brought me happiness. She is outgoing and bubbly and says good morning to you!” said Aiaiai, a 15-year-old fan in Zhejiang province, who spoke under her online pseudonym. From her perspective, Chinese virtual idols do not have much personality. “They were born just to make money,” she said. “The only difference is they do not show their faces compared with regular idols.” Li Shiyan, the head of the human-machine interaction lab of Baidu Cloud, said that the technology for building virtual humans is still nascent. “When it comes to mass production, there remain questions of high technological barriers, long-term duration and high cost.” Baidu is working on lowering the cost of production with artificial intelligence technology, he added. Alibaba’s virtual live-streamers use natural language processing, image recognition, text-to-speech and cloud rendering technologies developed by Alibaba Damo Academy. However, Roland Berger’s Cheng argues that the development of virtual idols hinges more on content and less on technology. “We have so many virtual idols now, but the companies and professionals who are able to run them well are limited,” he said. “Just like superheroes in the US, there have been so many popping up within a short period of time, but the lasting ones are classic characters from Marvel and DC Entertainment.” That divide between technology and content draws a distinction between the likes of Alibaba and Baidu, which are more traditional tech service providers, and content-oriented companies. For Shanghai-based gaming company miHoYo, developer of the hit title Genshin Impact , virtual humans are an extension to its various forms of entertainment, a company representative said. The company first revealed its virtual idol Lumi on Bilibili in May 2020, and it now has more than 1 million followers. Bilibili itself is seen as the birthplace of Chinese virtual idols. The company considers virtual vloggers as a way to “enrich and complement” the platform’s content, a company spokeswoman said. “We are optimistic about the business prospects of virtual vloggers,” she said. “Other than doing live streaming, they also have strong IP potential and can create synergy with Bilibili’s ventures, including merchandise, animation and performances, which can all be monetised.” Why Chinese millennials prefer virtual influencers to real-life KOLs For now, the bulk of responsibility for content creation falls on the shoulders of companies specifically designed to develop IP, such as StarHeir and Musiness. “Our three main departments – content, technology and business development – work hand in hand,” said StarHeir’s Jiang. With fresh funding of US$1.57 million, raised in a round led by Chinese gaming giant NetEase last December, StarHeir plans to focus on developing 15 virtual idols in China and another 15 for overseas markets. It is also promoting its virtual streetwear brand Meta Street Market this year. “In the early stage of the virtual human industry, it is such a cash-burning game that only the tech giants are willing to play without gain,” said Musiness’ Tong, whose company has spent around 1 million yuan on Metamuse without yet turning a profit. “We are developing a group of virtual live-streamers who can sell products, and whose business model would be more differentiated from Metamuse,” she said.