Princess Sissi, dressed in a figure-hugging Chinese gown Qipao, chit-chats on a live streaming app with an audience in China, Egypt and Japan, entertaining and encouraging them to buy digital gifts which she can later redeem for cash.
The biggest gift Princess Sissi, a native of the eastern Chinese city of Nanjing, has received so far is a virtual world tour worth over $10,000 which she will share with the app platform Up Live.
Although live broadcasting on mobile phones first appeared in the US, Chinese apps commercialised the technology with the virtual gifts model. While fashion bloggers and YouTubers in the west still rely on advertising, Chinese internet celebrities are already making money from followers.
In the past 18 months, 200 startups have emerged in China broadcasting the daily lives of live-streamers – usually hot girls in their twenties.
Tech giants and venture capitalists have poured billions of dollars worth of investment into the platforms, pushing a handful to valuations of more than $1 billion – dubbed unicorns in the venture capital industry because of their rarity.
China’s internet and social network giant Tencent’s investment in Kuaishou in March has pushed the valuation of that short-video app to about $3 billion, according to Bloomberg.
“Frankly in China everything is over-competitive, super competitive. It kind of distorts the landscape. I think internationally the market is less competitive,” Andy Tian, co-founder of Asia Innovations Group which developed Up Live, the platform which hosts Princess Sissi among others, told FinanceAsia in an interview.
Winners are already emerging in the Chinese live streaming market which is only two years old. According to a report by industry consultancy firm iResearch, China’s live streaming will generate revenues of over $6 billion in 2017, of which 70% will be shared by the top nine apps.
“The US from the tech perspective is very advanced. It is still ahead in many areas in terms of creativity, innovative applications and really turning things into fantastic applications,” said Mac El-Omari, vice chairman of investment banking at JP Morgan, however he added, “The technological ability to execute, to deliver, to expand, to commercialize, is much greater in China.”
Chengdu-native Tian hopes to be one of the survivors and his strategy is to focus on overseas markets. Since its launch in June 2016, Up Live has set up operations and recruited hosts from countries including Vietnam, Japan, Egypt and Turkey.
While the bulk of Up Live’s revenue still comes from Chinese speaking regions, the Middle East and Japan have become the two biggest growth engines for Up Live. Sales in Arab countries are growing at 30% to 50% and doubling in Japan every month albeit from a low base. With an overall growth rate of over 10%, Tian expects Up Live’s revenue to top $200 million this year.
Investors are backing Tian’s plan. American venture capital firm Kleiner Perkins Caufield & Byers has put money into Asia Innovations. Tian’s firm has already gone through four private fundraisings and was valued at $250 million in its latest round.
Tian is shooting for a multi-billion dollar initial public offering in either the US or Hong Kong by the end of next year.
East meets west
Fritz Demopoulos, an investor in Chinese tech firms and co-founder of online travel giant Qunar, said Up Live has capitalized on the rising purchasing power of consumers in North Asia, Southeast Asia and Middle East.
“The Chinese consumer plus the emerging markets consumer, they’ve been saving money for years, and now they want to spend that money,” Demopoulos, who was Asia Innovations’ first financial backer in 2013, told FinanceAsia in an interview.
However, when going abroad, most Chinese companies fail because they don’t know how to operate overseas, said Demopoulos, adding that an “international outlook” is what he valued most in Up Live’s team.
“It’s not just Chairman Mao versus Douglas MacArthur. It’s together,” said Demopoulos.
A graduate of Massachusetts Institute of Technology, Tian was one of the first employees at Google China. He co-founded Asia Innovations four years ago with Ouyang Yun, the then second-in-demand of Tencent’s corporate strategy department.
“[Ouyang] knows everything about Tencent’s social businesses, so we take a lot of playbooks from Tencent and combine my playbooks from (American mobile game studio) Zygna and Google,” said Tian.
Up Live is also fighting fellow Chinese live streaming apps in emerging markets for market share. Its biggest rivals are Singapore-based Bigo Live – valued at $400 million in its latest round of capital raising – and Live.me, a subsidiary of Beijing-based Cheetah Mobile.
Both Cheetah and YY are listed in New York. Cheetah has a market cap of $1.7 billion and made revenue of $687 million in 2016. YY is double the market cap of Cheetah and trades 13.6 times earnings.Snap, the Los-Angeles-based parent company of messaging and photo-sharing app Snapchat, said in its annual report it’s facing “substantial competition” in video streaming from these Asian challengers.
Thanks to the live streaming boom, shares of Beijing-based Momo have more than doubled this year after annual sales jumped to $553 million from $134 million due to the new feature. The social app developer’s market cap is now $7.9 billion.
While ranking the second live broadcasting app in Japan in terms of monthly revenue and the first in Taiwan and a few Arab countries such as Saudi Arabia and Qatar, Up Live’s eventual goal, according to Tian, is to attract audiences in Europe and the US. But to entice western users to pay for pretty girls’ chitchat, is not easy.
“It’s like in games,” said Tian, referring to a business where he had worked for more than six years. “People told me nobody will pay for virtual items in the west. But now, they all do. It just takes time’.
