Ageless and scandal-proof: Chinese tech groups bank on virtual influencers

China’s celebrity influencers Viya and Li Jiaqi — aka Austin Li the “lipstick king” — used to attract millions of shoppers to ecommerce platforms, but scandals and their subsequent disappearances exposed the risks of crossing the Chinese Communist party.

Enter the virtual idols. Computer-generated avatars are considered a safer option by companies as Beijing cracks down on human celebrities deemed politically outspoken or with questionable morals.

Over the past year, Chinese investment and tech groups including Tencent and ByteDance have ploughed hundreds of millions of dollars into companies that develop digital influencers. China’s virtual idol industry is predicted to jump sevenfold from Rmb6.2bn ($870mn) in 2021 to Rmb48bn in 2025, according to Guangzhou-based iiMedia Research.

ByteDance this year bought a 20 per cent stake in Hangzhou Li Weike Technology, the start-up behind popular virtual character LA. WK. Last November, Alibaba led a $20mn Series A financing round of DGene, a virtual reality developer with offices in Shanghai and Silicon Valley. A month later, Tencent invested in Facegood, a Shenzhen-based software developer focusing on 3D facial animation.

Xmov, a Shanghai-based start-up which owns multiple digital influencer IPs and has the goal of building “virtual world infrastructure”, announced in April that it raised a total of $130mn in its Series B and C funding rounds from investors including Sequoia China and SoftBank.

“I rarely socialise with people in real life, but I feel happy when I see my idols’ vibrant performance on the screen,” said Babol, a fan of A-Soul, China’s most popular animated girl group, which was jointly launched by ByteDance’s gaming unit Nuverse and artist management firm YH Entertainment in 2020. “Every time I watch their live-streaming shows, I couldn’t help smiling.”

Virtual influencers have demonstrated an ability to monetise connections with fans. Vox Akuma, a virtual YouTuber owned by Japanese virtual idol agency AnyColor, made his China debut on video-streaming site Bilibili in May. During his 100-minute live-streaming session, Vox Akuma gained tips totalling Rmb1.1mn from roughly 40,000 fans.

The gains are still far below what human influencers used to earn. Li and Viya sold a total of Rmb20bn worth of goods during their livestream sessions on the first day of presales leading up to Alibaba’s “double 11” shopping festival in November last year.

Still, international fashion brands are increasingly hiring virtual idols as ambassadors in China as they cut ties with celebrities forced to quit public life because of scandals during Beijing’s crackdown on the country’s entertainment industry.

Danish jewellery maker Pandora ended its collaboration with Chinese actor Zhang Zhehan in August last year, after state media denounced him for “hurting the nation’s feelings” by taking photos in front of Tokyo’s Yasukuni Shrine, which controversially venerates Japan’s 2.5mn war dead. In March, Pandora posted portraits of SAM, a virtual idol owned by lifestyle magazine Elle, wearing the brand’s Marvel-themed bracelets and necklaces.

Bulgari invited Ling, a virtual influencer developed by SoftBank-backed Xmov, to showcase a new series of handbags last November. The Italian luxury house had terminated its contract with Kris Wu in July last year, after the Chinese-Canadian pop star was accused of sexual assault.

Local governments in China are hoping to capitalise on the nascent industry. In August, Beijing became the first city in China to roll out a dedicated development plan for the “digital human industry”, with the goal of building it into a sector worth Rmb50bn and cultivating 10 companies with an annual revenue of more than Rmb1bn by 2025.

“They [virtual idols] don’t age, the IP lasts forever, they don’t get sick, or tired. Fictional characters do not have the risk of scandalous personal behaviour, they are potentially less expensive to produce,” said Tom Nunlist, a senior analyst at consultancy Trivium China.

“The controllability of virtual idols may also be attractive to Chinese officials, from a censorship and propaganda perspective,” Nunlist added.

But the industry is not scandal-proof. Accusations of worker exploitation against ByteDance emerged following the suspension of a core member of virtual girl group A-Soul.

In May, A-Soul announced the dismissal of a virtual member named Carol in a social media statement, citing “health and education reasons”. Fans researched the actress behind the character and found her personal blog posts, which they believed to be evidence of underpayment and workplace bullying.

Local labour authorities in Hangzhou conducted an investigation into the case and said no evidence of underpayment or forced employment was found. The group also denied the accusations in a written reply to the Financial Times.

After Carol’s departure, Babol said he no longer watches the group’s live-streaming shows. “I felt like something was missing,” he said.

Beijing is monitoring the evolution of the virtual idol sector, warning against celebrity culture and excessive “fandom”.

A commentary in the People’s Daily, the Chinese Communist party’s official newspaper, criticised fervent A-Soul fans for “blurring the line between the virtual world and reality”, echoing Beijing’s apprehension toward “chaotic” fan culture.

A think-tank owned by the state-backed newspaper also called for scrutiny of the industry in a research report published earlier this year.

“Compared to traditional real icons, virtual idols have advantages such as a more stable and controllable personality, but after all, they are arts characters created by human beings and exposed to depravity risks,” said the report.