Wanghong economy

The Wanghong economy is the nascent Chinese digital economy based on influencer marketing in social media.[1] Wanghong (Chinese: 网红; pinyin: wǎnghóng; lit. 'Internet fame') is the Chinese term for an internet celebrity.[2] Chinese Wanghong attract the attention of Internet users, which can translate into profit through e-commerce and online advertising.

According to CBN Data, a commercial data company affiliated with Alibaba, the Internet celebrities economy is set to be worth 58 billion yuan in 2016, more than China's cinema box office in 2015.[3]

Business Model

Wanghong economy has two main business model: online retailing and social media advertising.

Online retailing

In the online retailing business model, e-commerce-based wanghong use social media platform to sell their self-branded products to potential buyers among their followers via Chinese customer to customer C2C website, such as TaoBao. Celebrities work as their own shops’ models by posting pictures or videos of themselves, wearing the clothes or accessories they sell, or giving distinctive makeup or fashion tips.[4] Chinese e-commerce internet celebrities play a role as key opinion leaders (KOLs) in online retailing. Wanghong’s fashions and lifestyles are favored by their followers. Their followers think that they can look like Wanghong if they put on their products or similar make-up. It enables their followers become their most loyal consumers.

Also in this business model, consumers are becoming the voices of those products and significantly impacting the success or failure of online stores, products, and brands, particularly through their involvement on the social media. Those consumers play the important roles of driving the products and brands to thrive.[5] These type of consumers are considered as Prosumers or “Professional Customers”. New forms of consumption disentangle themselves little by little from rigid social stratification and end up being governed by fashion trends and experts who provide good taste and chic outfits.[6]

This is a lucrative business in most cases. For example, Zhang Dayi, one of China's best known Wang Hong with 4.9 million Sina weibo followers, she has her online shop in TaoBao website, reportedly earning 300 million yuan ($46 million) per year.[7] This compares favorably to top Chinese actress Fan Bingbing, who according to Forbes, made about $21 million last year. In 2015, Alibaba’s Singles Day sales reached a record of $14.3 billion, with most of that coming from its online retail platform, Taobao. Five of Tabao’s top 10 best performing shops that day belonged to Wanghong.[7]

Social media advertising

The foundation of social media advertising is content and it relates to the Wanghong Economy.[8] Wanghong use free high quality original information to attract netizens' attention and change their habits. These internet celebrities have broken the monopoly of traditional media, they have thousands of followers who are willing to receive and believe information from them.[9]

There are two ways to advertising the product by Wanghong.

Pay internet celebrities for advertising the products. When internet celebrities have enough followers, some companies will contact them for advertising. For example, in 2016, inserting an advertising video in Papi Jiang's (papi 酱) internet video program will cost the company 22 million yuan which is about 2.5 million pounds; Moreover, Some manufacturers will set new brands for internet celebrities and they will be the suppliers, so that they can save the cost of marketing to sell the products to the fans of internet celebrities. For instance, Zhang Dayi (张大奕), a famous fashion internet celebrity on Sina Weibo, reports her brand's annual sales over 1 million pounds.[10]

Shape the official social network pages to become an internet celebrity. For example, Bowu (博物) Magazine has 6.2 million followers, Gugong Taobao (故宫淘宝) has 670 thousand followers and Haier has 580 thousand followers. The company network accounts will post advertisements, but they are focusing on attracting new followers. They will communicate with their followers and create some topics to encourage followers to discuss. Bowu magazine is a natural and science magazine. To shape itself becoming an internet celebrity, the magazine identified species for the netizens in the first-person perspective and this behavior attracted the attention of users and they succeeded. The number of followers increased dramatically from 800 thousand in 2015, Jan. to 6.2 million in 2017, March. At the same time, the circulation increased from tens of thousands to 220 thousand in 2015.[11]

In addition, the styles of Wanghong are more distinct and their fans or followers as well. Thus, it is easy to differentiate the needs and characteristics of different groups. Then companies can choose those groups whose needs are matching the products. To satisfy the needs of targeting customers, internet celebrities can enhance the accuracy of advertisement. It is different from traditional celebrities, because the distance between internet celebrities and followers is shorter, so more followers can be converted to buyers.[12]

Live advertising

'Live+E-mall+Wanghong' is a new advertising mode in Wanghong economy. This kind of advertising mode can create a platform for followers and audiences to communicate with Wanghong. The advertising can be integrated into the content of program like a placement, so the advertising is easier to be accepted by customers. For example, in 2016, Baicaowei (百草味), a snack company, compared with sales in the last year, increased 5 times sales during the 618 shopping festival, because they cooperated with a famous Wanghong called Shenman (沈曼)[13] who is from YY, one of largest live platforms in China.[14]

Digital Marketing of Wanghong economy

The medium used by the Internet celebrity is the Internet. Digital marketing is used in many aspects of the birth and development of Internet celebrity.[15]

Companies use Internet Celebrities to attract people's attention or created good content through their efforts to attract fans' attention. Internet celebrities have talents and skills, involving beauty, fashion, food, life, humour, education and music. They cover a fan base in different areas of interest who follow that Internet celebrity's words and deeds.[16] The commercial value of an Internet Celebrity has been recognized and the commercial production of new Internet celebrities has appeared.[17] There are professional Internet Celebrity companies to package people they think have potential ability.[18]

Today, Internet celebrity is more like a brand or a production. Reasonable marketing can make Internet celebrity, and their company run itself better and gain more revenue.

Digital Marketing Strategy

Internet celebrity's digital marketing strategy can be divided into the following steps. In the birth phase of Internet celebrity, the marketing strategy first locations the Internet celebrity. This location includes the characteristics of Internet celebrity and the target audience. The next step is to increase awareness and influence. Internet celebrity should accumulate a large number of fans in this step. The ultimate goal of the Wanghong economy is to transfer Internet celebrity’s awareness into revenue. Therefore, the more loyal fans of internet celebrities, the higher the income they may create. After the Internet celebrities were born and amassed fans, the marketing strategy focused on protecting the public image of celebrities on the Internet, avoiding out of fashion and preventing the loss of fans.

[19]

Digital Marketing Methods

The media of digital marketing can be mainly divided into social networks, video websites, search engines, news portals and e-commerce websites.[20] For social network websites, for example, the Facebook, Twitter, Instagram and Weibo, the Internet celebrity runner could cooperate with the site to push their content to the target audience. As for the search engines, for instance, the Google, Bing and Baidu. The Internet celebrities can place advertisements on search engines to making the Internet celebrity appears in related searches or making the Internet celebrity rank higher. The other video websites medium like YouTube and electronic business platform like Taobao are also an important way to marketing Internet celebrity. The advertising revenue of the video website and the sales from the online shop at the e-commerce store are the main revenue of Internet celebrity. They can spend money to promote their own videos or stores on the homepage of the website to attract more audience.

Moreover, the Internet celebrity is a self-media, themselves are the high-quality communication channel. They can spread not only their fans, but fans themselves are also carriers of self-propagating effects. If the Internet celebrity company runs some Internet celebrities, they can recommend each other's content to their fans.[21] This method is an efficient and low-cost marketing method.

Global Context

Digital

A report from the China Internet Network Information Center showed that in 2015, Chinese people spent 3.75 hours online every day on average.[4] By June 2014, there wer</ref> e 632 million Internet users in the country and a penetration rate of 46.9%.

The rapid uptake of smart devices in China is of critical importance in that it lays the foundation for the development of the digital consumer market. There were 80 million smartphones in circulation in China in 2010, a figure which skyrocketed to 580 million units in 2013, and is expected to further increase to over 1 billion units by 2016. There are 650 million mobile internet users, 350 million smartphone subscribers and 290 million active WeChat users.[22]

The Internet is also creating entirely new markets for products and service offerings that may not have existed even a few short years ago. E-commerce is fundamentally reshaping the retail sector and leading to greater consumption.[23] Digitalization has created a new generation of Chinese consumers. These emerging consumers have more sophisticated consumption habits than Chinese consumers ever had in the past. To be successful, enterprises need to understand their customers and offer a distinctive experience to them. Understanding customers requires getting valuable actionable insights about them.[22]

Young People Consumption

The Post-90s are dependent on the phone, appreciate the diversity of taste, highly dependent on social media, keen online shopping. Their pursuit of young fashion, self-centered, rational in consumption, seeking novelty and thirsty for knowledge, trying to outdo others, and impatient characteristics. They have stronger consumption desires and excessive spending consciousness; and they prefer new advertising methods rather than traditional marketing ways.[24]

For the Post-90s, Wanghong are perceived to be more authentic and less distant by them compare to conventional celebrities. Overwhelmed by the variety of products available, Wanghong act as Key Opinion Leaders in his/her specially field. Through making videos on "how to do make ups", "how to dress well" etc., giving away useful tips and advice, Wanghong plays an important role in the purchasing process and act more like a trustful advisory.[25]

Chinese Consumer Culture

Political: Chinese Censorship

The apparatus of China's Internet Control is considered more extensive and more advanced than in any other country in the world. The governmental authorities not only block website content but also monitor the Internet access of individuals. "Although, the improvement made in certain areas of civil rights in China, individuals' speech rights, especially political speech rights are limited. In its characteristically sweeping language, the Chinese Internet white paper states the Chinese government forbids Internet content: against the cardinal principles set forth in the Constitution; endangering state security, divulging state secrets, subverting state power and jeopardizing national unification; damaging state honor and interests; instigating ethnic hatred or discrimination and jeopardizing ethnic unity; jeopardizing state religious policy, propagating heretical or superstitious ideas; spreading rumors, disrupting social order and stability; disseminating obscenity, pornography, gambling, violence, brutality and terror or abetting crime; humiliating or slandering others, trespassing on the lawful rights and interests of others; and other contents forbidden by laws and administrative regulations". This has caused Chinese celebrities online to focus on topics such as lifestyles or fashion, unlike some popular online celebrities in the west who make satire or talk about political and social issues.

Demographics: Chinese Large Consumption

Chinese people escalating demand for consumption, increasing demand for consumption comes from two major factors in China. One is the absolute increase in the size of the population, and the other is the expanded economy and greater disposable income. An average GDP per capita rose at over 9.8 percent annually for the past more than 30 consecutive years, thus enabling China to become the second largest economy in the world in 2010.[26] As China’s living standards are rising with the economic growth, Chinese consumers’ shopping habits have changed, more and more consumers are able and willing to spend more on goods and services.[27]

Wanghong online shops have low prices and fashion features, meet the Chinese consumer psychology and mass consumption. With potential of more than 1.3 billion consumers,[26] China’s domestic market presents enormous buying power.

Chinese collective nature

There are some characteristics of Chinese culture that influence its way of consumption and could explain the perception of Internet celebrities, according to that cultural values are considered as determinants of attitudes and behaviors: The first feature of Chinese society is the collective nature. The Chinese will adhere more easily to the standards of group than people in individualistic societies.[28] The second feature is Polychronic, the people in a polychronic culture are enjoying social harmony and in general emphasizing relationships more than tasks. According to the research cited “online social interaction is important in a collectivistic culture such as China. In fact, culture may be the strongest determinant factor of differences in customer online social networking and online shopping behavior across cultures (Pookulangara and Koesler, 2011 and Brandtzaeg, 2010). Since people holding these cultural values in general rely more on word-of-mouth from friends, family and expert opinions, and they are more likely to communicate and share information on social media, they also tend to find experts in order to earn leading opinion advice for important decision making and emotional support (Ji et al., 2010)”.[29] These characteristics give force to the role of opinion leaders who have a significant number of followers (like celebrities online), and who may bring an influence on a brand.

Symbolic Value

Symbolic consumption become a considerable trend which is driven by the young consumers. Products viewed as possessing meaning beyond its tangible presence. In another way, consumers who view products as symbols and imbue them with attributes that extend beyond their immediate physical nature.[30] Therefore, consumers buying products that not only for functional benefits, but also has a certain meaning and additional potential pleasure. Through the consumption process, consumers find the individual self-identities. This consuming behavior also become the symbolic activities.

If the consumer has choices to consume, s/he will consume things that hold particular symbolic meanings. For example, using recycled envelopes may symbolise 'I care for the environment.’, going to classical concerts may represent 'I am cultured.’, supporting gay rights may signify 'I am open-minded.’, and so on.[31]

In social media, Wanghong structured the tags of “fashion / chic/ individuality/ entertainment /beautiful “as the personal identification system, coding them in the variety ways of literal text/ audio /video, therefore, netizens decoding those symbolic activities in the process of consuming according to their preference, therefore, consumers not only purchase the goods, but also got the psychological pleasure. For instance, some of consumers get the visual pleasure due to they see a pretty face of wanghong, some of them get the auditory pleasure because they listened the Wanghong’s singing.

Future and Concern

According to Venture Capitalist Mary Meeker’s annual internet trends report,[32] the ungrading of the Internet trend is speeding up, millennials’s consciousness as consumers are rising. This makes sense that the content is the most valuable part of a Wanghong to increase the network traffic, and this is also how Wanghong differs from the traditional celebrity: Wanghong’s major value is his/her content, while the trandional celebrity’s value is mostly him/herself, so the traditional ones can speak for a product getting rid of the content, but Wanghong can’t. In order to attract followers’ attention, some of Wanghongs use vulgar, mammonish, sexually violent contents, which is challenging the bottom-line of morality in society and influencing the younger people’s attitude towards consumption in a negative way. To deal with this problem, at the end of 2016, the Chinese Ministry of Culture released the “Measures for the Administration of Online Performance Operating Activities” aiming at regulating market order and promote the healthy and orderly development of online performance industry[33]. Besides, in terms of the output of content, Wanghong is lack of sustained motivation, if they can’t keep innovating their contents and coming out with new fresh ideas, one day they will lose their value to attract the followers.[34]

Although there’s a voice believing that this phenomenon is just a “flash in the pan”, most experts still think that this new business model is booming.[35] According to McKinsey’s report about Chinese consumers’ trend published in 2016, even though China’s economic growth is slowing down and the consumer confidence is trending down, Chinese consumers’ market is still expanding, China is in the process of transformation into a consumer society, consumers are shifting "from products to services and from mass to premium segments", more and more of them start to "seek a more balanced lifestyle where experiences take priority",[36] along with the development of new technology like virtual retail-ity of Alibaba, Wanghongs are also transforming from the role of ‘salesmen’ to the role of ‘substitute user’, they provide their direct, authentic experience of products to their followers.

  1. Papi Jiang's popular video "http://v.youku.com/v_show/id_XMTU4Mjc3NTk3Ng==.html?from=s1.8-1-1.2&spm=a2h0k.8191407.0.0" at Youku.
  2. Celebrity economy set for explosive growth in China "http://www.ecns.cn/business/2016/03-16/203077.shtml" at ECNS.
  3. Symbolic consumption "http://catalog.flatworldknowledge.com/bookhub/reader/8111?e=sirgy_1_0-ch03_s01 at Flat World Education.
  4. Virtual Retail-ity "https://news.vice.com/story/alibaba-vr-shopping-buy-singles-day" at Vice news.

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