analyst opinion: the rise of livestreaming€¦ · july 2 5, 2017 deborah weinswig, managing...

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Inthisseriesofshortnotes,weexplorevariousaspectsofconsumerbehaviorasitrelatestotechnologyadoptionandretailintheUSandChina.Inthisreport,wefocusonlivestreamingasawaytomonetizeuser-generatedcontentbyinfluencersandkeyopinionleaders(KOLs).

1) User-generatedlivestreamsarenotnewinChina,noraretheyintheUS,but2016sawincreasingadoptionoflivestreaminginChina,asdistinctcontentmonetizationmodelsemergedaroundvirtualgiftsande-commerce.

2) ThelivestreamingeconomyinChinahassufficientcontentsupplyanddemandtoensureitsgrowthoverthemediumterm,withinvestmentflowingintonewcontentgeneration.

3) ThemarketcharacteristicsandconsumerbehaviorintheUSaremarkedlydifferentfromthoseinChina,butplatformsintheUSareexperimentingwithvirtual-giftfeaturesthatarecommoninChina.WethinkthesehavelimitedpotentialasmonetizationtoolsintheUS.

Deborah Weinswig

Managing Director,

Fung Global Retail & Technology

deborahweinswig@fung1937.com

US: 917.655.6790

HK: 852.6119.1779

CN: 86.186.1420.3016

Analyst Opinion:

The Rise of Livestreaming

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

ThegrowthoflivestreamingwascertainlyoneofthebigstoriesinChinain2016,andthetopiccontinuestograbheadlinesin2017.Todate,therearemorethan200livestreamingplatformsthatcatertothemobile-firstChineseconsumer,someofthemostpopularbeingYY,Huajiao,Douyu,TaabooLiveandPanda.Thedifferentplatformshavegeneratedastaggeringamountofcontent,withChinesemediareportingthatTaobaoLivealonegeneratedover140millionhoursofcontentinthepastyear.Becauseofitspopularityandeffectiveness,livestreamingisnowwidelyadoptedbybrandsandretailersasawaytomarketandsellinChina.Beyondentertainment,gamingande-commerce,livestreamingisnowexpectedtofindadoptioninnon-entertainmentverticalsasdiverseaseducationandfinance.

FungGlobalRetail&TechnologyManagingDirector,DeborahWeinswig,livestreamedfromtheAlibabaGateway‘17inDetroitattracting26,000viewsonWeibo.

Whileuser-generatedlivestreamsarenotnewinChina,noraretheyintheUS,2016sawincreasingadoptionoflivestreaming,asdistinctmonetizationmodelsemerged.ThisledtotheproliferationofInternetcelebrities(wanghong)andthecreationofthe“cewebrity”economy,whichissettogrowto$17.0billion,accordingtoestimatesfromAnalysys.ThescaleandincreasingsophisticationofthelivestreamingeconomyinChinafaroutshinesitsequivalentintheWest,wherelivestreamedcontentisprimarilyconsumedthroughYouTube,Facebook,Instagram,Twitter,SnapchatandspecializedplatformssuchasTwitchforgaming.

ThisopinionnotediscussesthefactorsthathaveunderpinnedthesuccessoflivestreamingasacontentmonetizationvehicleinChina,andhowthishasledpopularlivestreamingfeaturesinChinatocrossovertosocialmediaplatformsintheUS.

Beyondentertainment,gamingande-commerce,livestreamingisnowexpectedtofindadoptioninnon-entertainmentverticalsasdiverseaseducationandfinance.

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

Monetization:VirtualGiftsBeyondadvertising,whichisthetraditionalwaytomonetizecontentintheWest,livestreamingplatformsinChinahaveleveragedvirtualgiftgivingasawaytoalignincentivesbetweentheplatform,thecontentcreatorandtheviewer.Virtualgiftsarepurchasedbyviewersandpresentedtothebroadcasterinreal-timeduringalivestream.Thebroadcastercanacknowledgethegiftliveandperforminreturn,creatinganengagingexperiencefortheaudience.Thedigitalgiftsarethenconvertedtocashandtherevenueissplitbetweentheplatformandthebroadcaster.

Becausevirtualgiftsofferadirectrelationshipbetweenthequalityofthecontentandtherevenuegenerated,manyaspiringperformershavejumpedonthenumerouslivestreamingplatformstobroadcasttheirtalent,skills,oropinionsasawaytoearnpart-timeincome.Inmanycases,amateurbroadcastershavereportedsufficientcomplementaryearningstoincentivizethemtocontinuegeneratingcontent.Thishasledtotwointerestingoutcomes:1)thereisnowwhatseemstobeasustainablelong-tailofbroadcasterswithnichefollowingsforwhompursuinglivestreamingiseconomicallyviable;and2)theinteractivenatureofvirtualgiftgivinghasledtothecreationofcommunitiescenteredaroundbroadcasters,whichhasspurredthedevelopmentofrelationshipsamongtheirmembersinwhatcanbeconsideredanewformofsocialmedia.Asaresult,thelivestreamingindustryinChinahassufficientsupplyanddemandintermsofcontenttoensureitsgrowthoverthemediumterm.

MonetizationModels:E-CommerceTheotherbigmonetizationmodelforlivestreamedcontentise-commerce.BoostedbyplatformssuchasAlibaba’sTmallLiveandJDLive,contentcreatorshavebeenabletobuildbrandsandfollowingsthatallowthemtooperatee-commercestoreswhichyieldimpressivesalesfigures.Forexample,oneTaobaoKOL,Cherie,reportedthathere-commercestoregenerated¥100million(approximately$15million)duringAlibaba’sSingles’Dayin2016.

Inane-commercecontext,livestreamedcontentlooksalotlikedirectselling—similartoahome-shoppingchannel—whereprominentInternetcelebritiesshowcase,trialandsellproductstotheironlinefollowers.Insomecases,influencershavestartedtheirownlabelsratherthanmarketingorcuratingbrandedproducts.Theyareentrepreneurswhorundigitalbusinesseswithlargeenoughteamstosupportproductsourcing,distributionandafter-salesservices.Fromthisperspective,theinfluencereconomyenabledbylivestreaminghasbecomeadisruptortotraditionalfashionandbeautybrandssellinginChina.

LivestreamingplatformsinChinahaveleveragedvirtualgiftgivingasawaytoalignincentivesbetweentheplatform,thecontentcreatorsandtheviewers.

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

LivestreamingTrendsWhatisnextinstoreforlivestreamingandthecewebrityeconomyinChina?

Lastyear,wesawdramaticinvestmentfromventurecapitalinlivestreamingplatformsandintalentfrominfluencerincubatorswhichaimtogroomandrepresentthenextbatchofcewebrities.

Alreadyin2017,wehavewitnessedconsolidationdiscussionsontheplatformend,assomeofthe200platformsarenaturallynotexpectedtomakethecut,butthereisalsoanincreasedemphasisoninvestinginbettercontentandexpandingthescopeofverticalsthatarecoveredbylivestreams.Forexample,thepopularlivestreamingplatformcompanyYYisbranchingoutintonon-entertainmentcategoriessuchasfood,automobileandpets.Inaddition,virtualreality(VR)contentisviewedbysomeasthenextbigthingforlivestreaming,whichwillenableatrulyimmersiveuserexperience.And,whileHuajiaoLivereleasedVRZone,a3Dlivestreamingplatform,wearestillalongwayoutbeforemassadoptionofVRcontent,duetothemultipleimpedimentsofthetechnologywhichwillhamperadoptionintheshortterm.

Source:www.huajiao.com

WhatDoestheGrowthinLivestreamingMeanforCompaniesintheWest?Sincethebeginningof2017,wehaveseenseveralUSplatformsstartingtoexperimentwithsomeofthefeaturesthathavemadelivestreamingintoanindustryinChina.YouTubeintroducedthe“Super-chat,”whichenableslivestreamviewerstopaytohavetheircommentfeaturedmoreprominentlyinachatstream,andTwitteradded“SuperHearts,”whicharevirtualgifts,toPeriscopeinJune2017.Inaddition,therehavebeenafewentrantstothemarketthatoriginatedinChina,namelylive.meandlive.ly.However,weremainskepticalaboutwhetherthesefeaturescanbesuccessfullyadoptedintheUS.

WehaveseenseveralUSplatformsstartingtoexperimentwithsomeofthefeaturesthathavemadelivestreamingintoanindustryinChina.

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

OneofthereasonsthatdigitalgiftgivinghasbeensosuccessfulinChinaisdigitaltipping—thepracticeofsendingasmallamountofmoneytoapublisherorbroadcasterdigitally.Tippinghasbeenadoptedbyplatformsthatsupportcontentintext,audioorvideoformats,suchasWeibo,China’sbiggestmicro-bloggingplatform,whichaddedthefeaturein2014,andWeChat,whichfollowedin2015.Inessence,onlinetippinginChinahasintroducedanewwaytomonetizecontentthatissupportedbyconsumerbehaviorinthelocalmarket.Theubiquityofdigitaltippinghasledtoanincreaseinthenumberofconsumerswho“tip”forcontentandwhosendmoneyonlinethroughdigitalredpacketsasasignofgratitude,apracticethatisalignedwiththetraditionofredpacketgivinginChinaduringtheNewYear,andwhichismadeeasierwiththeincreasingpenetrationofmobilepayments.

Source:WeiboIOSApp

ThemarketcharacteristicsandconsumerbehaviorintheUSaremarkedlydifferentfromthoseinChina.Mobilepaymentpenetration(asmeasuredbymobilepaymentusersasapercentageofsmartphoneusers)isonly43.7%intheUScomparedto83.3%inChina,andgivingmoneyasasignofgratitudedivergesfromtraditionalsocialnorms.Fromthisperspective,themonetizationpotentialofintroducingvirtualgiftstolivestreamingplatformsintheUSseemslimited;however,itwillbeinterestingtoseewhetherthisfeatureleadstoincreasedengagementandinterestinlivestreamedcontent.

OnlinetippinghasintroducedanewwaytomonetizedigitalcontentthatissupportedbyconsumerbehaviorinChina.

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July5,2017

DeborahWeinswig,ManagingDirector,FungGlobalRetail&Technologydeborahweinswig@fung1937.comUS:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comKirilPopovSeniorAnalyst

HongKong:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com