Why are the Chinese spending five billion dollars on online friends?

Live streaming is gaining traction across Asia as a social activity and lucrative profession. Governments across the region have been quick to recognise the need to carefully watch what is going on.

by Tan Jie Ying, edited by Francesca Ross

Sherry Gun left her job as a saleswoman to become a full-time live streamer. She earned more than RMB75,000 (US$10,900) for her 31 videos. Today she is completing a four-year jail sentence for broadcasting lewd and obscene acts online.

Many live streamed videos are far less raunchy but also less lucrative. Alessa Zhang, a popular Chinese live streamer explained, “[It is a] big score if the streamer is a woman and pretty. That is why female game streamers can get more viewers than men over the same amount of time.”

Live streaming app users constituted around 46% of all Chinese Internet users, a recent report suggested. The market for live streaming in China is estimated to be worth US$5 billion this year.

Live streaming platforms allow performers to transmit live video content and create an interactive experience between the streamers and their audience. Users spend hard cash to send virtual gifts to the host for fulfilling a request or as a reward for the interactive experience.

The live streaming platform cashes out the virtual gifts, absorbs a portion – around 60% or 70% – before passing the remainder to the host.

Virtual gifts turning live streaming into a lucrative business model

Live streaming is driving business for Chinese social media companies. Around 80% of Chinese social networking app Momo’s revenue comes from this feature. Live streaming generated a total of US$194.8 million in revenue for Momo in Q4 2016.

Chinese social networking platform YY’s revenues have also increased from RMB5.9 billion in 2015 (US$863 million) to RMB8.2 billion (US$1.2 billion) in 2016. This was driven by a 54.8% year-over-year surge in live streaming earnings.

Live streaming’s lucrative nature means it is a viable job for many Chinese netizens. Most people running their own channels consider themselves fortunate to make a few hundred dollars each month. Luckier ones earn US$2,000 a month. More successful live streamers earn over US$1 million a year.

Live streaming can be more rewarding than many traditional professions for netizens from lower tier cities. Zhao Xinlong’s live streaming sessions on Kuaishou earn him around US$850 a month. That is twice his salary as a taxi driver. Cheng Lihua earns close to US$3,000 a month from chatting and singing in her live streaming sessions. This is seven times the average monthly income for college graduates in her area of Inner Mongolia. Around 55% of all live-streaming app users come from third-tier cities.

Offering virtual gifts is an option for men seeking companionship

Many Chinese men see live streaming as an option for companionship. Live streaming connections can even be a replacement for romance for single men. 80% of live streamers are female while 65.3% of the audience is male.

Offering virtual gifts is an easy way to make romantic advances. It is a way to tell someone on the internet “let me buy you a drink.” Live streaming platforms promise users access to social interaction that they otherwise would not have in the real world.

Live streaming is a tool to boost company sales

Global brands are jumping on the live streaming bandwagon to reach out to more Chinese consumers. US makeup brand Maybelline sold 10,000 lipsticks in China within two hours because of a successful live streaming campaign starring Chinese celebrity Angelababy.

Alibaba’s e-commerce website Taobao launched its own live streaming platform, Taobao Live, in March 2016. The purchase conversion rate on the platform is 32%. This means 320,000 items are sold for every 1 million views.

Live advertising is a more secure and rewarding source of income for live streamers. This is because live streaming “depend[s] solely on the generosity of their audience.” Tan Yuanwu quoted a minimum of US$443 for one hour of live advertising. An hour of live advertising with the less well-known Huo Qiu is at least US$295.

Singapore’s live streaming industry is also gaining traction, for different reasons

Bigo Live and BeLive, both Singapore-based companies, are rising fast in the live streaming sector. Bigo Live has over 500,000 registered users since its launch in March 2016. BeLive already has more than 7,000 downloads and 5,000 registered users since April 2017.

Singaporean live streaming users identify with these platforms in different ways from the Chinese. They see live streaming platforms as a tool for instantaneous and convenient online interaction.

“Live-streaming is more popular because millennials constantly need to be connected. Such platforms allow them to stay connected, meet different people and share new experiences,” a Bigo Live spokesperson said.

Live streaming also eliminates the time disjunction between a host and his audience. This makes it more attractive than other forms of social media broadcasting. “Millennials these days want the raw, behind-the-scenes look of their favourite personalities,” explained BeLive chief executive Kenneth Tan.

Governments are taking extra steps to monitor live streaming

Sherry Gunn is not the only live streamer to meet trouble from the authorities. The Chinese government has been active in regulating live streamed content. The Cyberspace Administration of China (CAC) shut down 18 live streaming platforms for disseminating illegal content in 2016. This included accusations of people wearing military uniforms or revealing outfits. The CAC also closed down more than 4,500 live streaming accounts for content that was “violent, obscene and vulgar,” said Chinese news agency Xinhua.

Chinese regulation of live streamed content seems to be part of a larger undertaking to closely monitor Internet usage. Officials at the Ministry of Commerce introduced new rules in December 2016 that ensure live streaming platforms can only operate under the government’s approval. It is also prohibited to hire foreign live streamers without the ministry’s permission.

Singaporean companies are attempting to regulate themselves

Singaporean authorities have not taken any direct action against live streaming activities. Bigo Live’s management team are strengthening the platform’s self-regulatory mechanism by reviewing activities on the platform 24/7 “to keep the community safe and open.” The site’s owners will be hoping this deters the Singaporean authorities from stepping in themselves.

Singapore’s Protection from Harassment Act already covers some aspects of misbehaviour on live streaming platforms. A person found guilty under this act can be fined up to S$5,000 (US$3615). This means live streaming users can always seek recourse to the law even when the government is less active in regulating live streaming activities.

This may be better for the Singapore government and the country. A government that actively regulates Internet use, including live streaming activities, risks being seen as repressive by its people. For now, the public can take the driver’s seat and decide what is obscene and what is not.