In March 2016, Papi Jiang attracted investment of Rmb12 million ($1.8 million) from a Chinese consortium in a groundbreaking deal that was dubbed as one of the most successful fundraising cases in China.
Did you think that Papi Jiang was a high-flying startup? In fact, Papi Jiang is a female student who became an internet sensation by talking about everyday life online.
The 31-year-old cyber celebrity has 27 million followers on her Weibo social blog – a similar level to twenty-time European soccer champion Barcelona, or the National Basketball Association (NBA) on Twitter.
Jiang’s case is a high-profile example of China’s live-streaming hype, created by the country’s internet boom and a sub-culture that glorifies the lifestyle of young people.
THE RISING STAR
2016 was dubbed the boom year for China’s live broadcasting industry. Apart from Papi Jiang, there were many cases of netizens giving up their regular jobs and turning full-time live broadcasters after earning overnight successes on the internet.
They included young girls broadcasting about hairdos and make-up, and young boys showcasing their gaming skills through sharing online game videos. They were able to earn a living through getting virtual gifts – literally cash donations – from their audience.
At the same time, the investment community was also upbeat about the live streaming industry, with venture capitalists and private equity funds pouring billions of dollars into live broadcasting platforms despite dozens of new app launches every month.
Douyu, an online platform for broadcasting gaming videos, secured $100 million in its series B round of funding from the likes of Tencent and Sequoia Capital in March. That was two months after Inke, the most downloaded live streaming app on the Chinese App Store, raised $15 million from its series A funding round in January.
In the first three months of 2016 alone, more than 100 live-streaming platforms have raised private capital in the hopes of expanding their user base rapidly and turning online video views into dollars.
According to Chinese consultancy firm Analysys, the overall value of China’s live-streaming industry is expected to reach Rmb100 billion by the end of this year, a figure that well surpasses the country’s movie ticket sales of Rmb56 billion last year.
PAST THE PEAK
However, the explosive growth began to show signs of slowing down since late last year when the government imposed greater control over content circulated through video-streaming platforms.
As many as 73 live-streaming platforms, including some leading apps in China such as AcFun, Bilibili and Ifeng, were ordered to shut down during a nationwide campaign conducted by the Ministry of Culture since March last year.
Most of these apps were penalised for allowing obscene or violent content, a strategy used by some netizens to gain traction online in the hopes of becoming an internet star. Since content is delivered in real time, the increasing popularity of live broadcasting also makes censorship of China’s internet more difficult.
Apart from government censorship, the industry itself was too crowded and some platforms were not able to survive, even for a couple of months.
Guangquan, a high-flying live-streaming platform that was once valued at over $80 million by investors, ran into financial difficulties and stopped paying salaries just nine months after it raised $2 million from its series A round of funding in September 2015. The company’s founder went missing shortly before it declared bankruptcy in February 2017.
In September last year, a financial consortium proposed to pay $460 million for a controlling stake in Inke, one of China’s biggest platforms focusing on marketing and advertisement-related videos. However, the plan was quickly called off three months later, suggesting investors had become cautious over the company’s prospects amid stiff competition across the sector.
CONTENT DIVERSIFICATION
Some industry observers believe the prevailing headwinds provide a good opportunity for consolidation in order to eliminate financially unsustainable live-streaming platforms.
At the same time, the revenue model for some of the bigger platforms is now clearer as their content starts to become more diversified.
Live-streaming in China was first popular among young audiences because the topics of conversation were mostly generated by their peers, and therefore felt relevant.
As the industry has evolved, live-streaming now covers a variety of topics including news, sports, music and entertainment. Live-streaming has also become popular among adults.
In particular, the popularity of internet celebrities and the interactive nature of live-streaming (the host can respond to pop-up comments instantly) had many retailers adopt it as an important channel to promote their products.
Chinese netizens have recently switched their focus to livestream quizzes, which allow viewers to compete for cash prizes through answering questions correctly. Live-streaming platforms that host these quizzes get a boost in download numbers, while companies are also keen to sponsor these quizzes to promote their brands through native ads.
“Apart from games, the live-streaming community has now developed content in animations, music and finance,” said Wenming Zhang, founder and CEO of Douyu. “There are now very high-quality users and they create a good interactive environment online.”
IPO WAVE
As the live-streaming industry starts to become more mature through consolidation and content diversification, some of the bigger platforms are preparing to go public in what could be another wave of initial public offerings by technology companies.
Cheng Chao, chief operating officer of Douyu, has admitted that the company is preparing for an initial public offering, which could raise about $300 million according to analyst estimates. Douyu, China’s largest game-streaming platform by number of active users, could extend Asia’s eSports IPO craze following the listing of Garena and Razer last year.
Huya, a similar game-streaming platform operated by US-listed YY, is tipped to pursue a separate listing in the US as soon as the end of the year.
Kuaishou, a Tencent-backed photo-sharing app that recently expanded its service to streaming of short videos, could also go public in Hong Kong by the end of the year.
For an industry overshadowed by regulatory risks and uncertainties over revenue models, it is uncertain whether these IPOs could be a worthy investment. But one thing is for sure – these IPOs will become yet another hot topic for internet celebrities when they hit the market.
China's biggest live-streaming platforms
| Monthly active users | Focus | Status | |
| Kuaishou | 146 million | Photo-sharing | Planning HK/US IPO |
| Xigua | 41.6 million | Short videos | Private company |
| YY Live | 22.4 million | Entertainment | Listed on Nasdaq |
| Douyu | 15.2 million | Gaming | Planning HK IPO |
| Inke | 11.7 million | Entertainment | Buyout dropped |
| Huya | 10 million | Gaming | Planning US IPO |
| Panda | 5.4 million | Gaming | Private company |
Source: Analysys
