E-commerce is the norm in the post-COVID world, where access to goods and services is just a click away. The drive toward E-commerce success has organically grown a new phenomenon in China, known as the Wang Hong economy.
So what exactly is Wang Hong?
Wang Hong is a Chinese term that has a direct translation to English as digital or internet celebrities. A similar comparison can be made between Wang Hong and Western influencers on platforms like Instagram and Youtube, in that both business models involve the use of social media, blogs and videos to build a fanbase.
However in China, the social media influencer industry has evolved in a different parallel internet – one whose censorship laws restrict Chinese citizens from accessing Western social media and internet sites. This has given birth to various Chinese social media platforms, many of which have parallels to Western social media giants. Instead of YouTube, Chinese citizens use Youku. Instead of Twitter, Chinese citizens use Weibo. The list goes on.
In this parallel internet, Wang Hong Zhang Dayi earned over USD 67 million in 2016. Comparatively, famous YouTuber Logan Paul made only USD 12.5 million in 2016. My team’s research, conducted at the University of New South Wales, reveals an increasingly mature influencer economy where Chinese influencers are part of an ecosystem of stakeholders who collaborate together to develop an entire Wang Hong economy. According to CBNData, a market data firm affiliated with Chinese e-commerce superpower Alibaba, the Wang Hong economy was worth 58 billion yuan (USD 8.6 billion) in 2016.
How is this an economy?
The concept of economy stems from the flow of capital, resources and inclusion of new actors into a functioning system. The development of the Wang Hong economy has undergone multiple stages of evolution. A retrospective examination demonstrates that the Wang Hong economy started with Chinese influencers posting blogs on various websites for their fans and content consumers.
Over time, Chinese social media platforms identified the opportunity of aggregating content as a business model and consequently, social media platforms were developed to host the growing volume of creativity. These early platforms include Weibo (aggregates micro blogs), YouKu (hosts videos) and more recently Douyu (live-streaming content), thus creating an ecosystem of early actors.
As the volume of multimedia content increased exponentially, illicit content including pornography, gambling and acts of terrorism started emerging. The proliferation of content threatened the viability of the ecosystem as the Chinese government drew a hard line on legally and socially derogatory content. As a consequence, regulatory consultancy firms and the government entered the Wang Hong ecosystem to provide legal guidance on future development.
The stability of the Wang Hong ecosystem and a growing number of consumers became an attractive prospect for monetising the phenomenon. The entry of investors into the industry was a pinnacle moment, with capital injection creating sustainable business models that transformed the ecosystem into an economy.
How do Wang Hong make money?
Monetisation strategies are key to the viability of the Wang Hong economy. Our team’s research from UNSW has identified the following strategies:
On platforms like Taobao, influencers have now started live-streaming reviews of products to their audience. Real-time reviews are becoming a key revenue source for most current and upcoming Wang Hong celebrities.
Da shang or “donations”
Platforms like Douyu have enabled fans and content consumers to “donate” money directly to their influencers. These donations demonstrate their appreciation to the Wang Hong.
Wang Hong started creating their own brands such as jackets, cups, and other memorabilia that are sold to fans and promoted on their social media platforms.
Gamification of products is a niche segment where Wang Hong are now promoting in-application game purchases, such as swords and other game items.
The creation of mini-series that features celebrities and Wang Hong are becoming more mainstream, resulting in the integration of Wang Hong influencers and actual celebrities.
Why does this matter?
Most research on influencers has largely been focused on the individual influencers themselves and has been conducted in a static point in time. Our research has a new emphasis, expanding influencer research from an ecosystem and economic view as well as examining the transformation of the Wang Hong economy over time.
For influencers and stakeholders, an economic perspective provides insights into the different types of alliances and resources required for Wang Hong celebrities to succeed. The collaboration and nuanced relationship between these stakeholders should be considered to derive greater innovation potential in the influencer industry.
In terms of future governance and policies, the Chinese Wang Hong economy is arguably more mature compared to its Western equivalents. Consequently, government institutions can review the regulatory evolution within China’s Wang Hong economy as a case study for creating new social media policy and predicting future regulatory trends.