Caixin
Jan 17, 2017 04:18 PM
BUSINESS & TECH

Weibo Resurrected by Cyber Celebrities

Photo: Visual China
Photo: Visual China

(Beijing) — It didn’t take a social media guru to foresee the demise of Weibo, China’s Twitter-like social media platform that took the nation by storm after the original Twitter was blocked in 2009. As early as 2012, the social-media superstar was already beginning to feel the pinch as web surfers flocked to WeChat, the instant-messaging app from internet rival Tencent Holdings Ltd. that has become an online giant in its own right.

The prophecy five years ago was that Weibo would die one of two deaths.

One saw users forsaking the platform and taking their socializing to WeChat, whose Facebook-like qualities allow for sharing of photos, articles and news. The other envisioned users drowning under a flood of ads, after e-commerce giant Alibaba Group Holding Ltd. purchased 18% of Weibo in 2013.

But those predictions were premature. In a break with its Twitter-like origins, Weibo Corp. developed a game-changing business model that brings in big money from a new generation of self-promotional online cyber celebrities. The result has been a resurrection of Weibo over the past two years, allowing it to finally post a profit in the spring of 2015.

It did even better in its latest reporting quarter through September, when profit doubled from the year before and active users increased by over 30%. Investors were pleased by the stealth comeback, boosting Weibo’s stock prices fivefold, up from a historic low of $9 to an all-time high of over $50 in October.

Weibo has found its niche by combining features of the original Twitter with other popular photo- and video-oriented services like Instagram and YouTube, according to Charles Chao, CEO of Weibo’s parent company, Sina Corp.

“Weibo has evolved from the era of words and images to become a platform that encompasses sharing of short videos, and even live casts,” said Xu Zhibin, who runs a marketing company for brands that target Weibo users. “Each innovative step has drawn new users and increased activity and time on-site,” he said.

Potent Tonic

Live streaming and short videos have proved a potent tonic to foster high user engagement and profitability. Weibo bet early on short, mobile-friendly video technology in 2013 by investing in Yixia, a Beijing-based developer of short video apps.

Yixia powers the short-video function on Weibo’s Miaopai platform. That section of the service shot to fame in 2014 with its viral “Ice Bucket Challenge” videos, a local edition of the U.S. series in which famous people dump buckets of ice over their heads to raise money for charity. Yixia also developed a highly successful lip-sync app that created online comedy sensation Papi Jiang, who has become a key online leader.

Yixia also provides Weibo’s live streaming function Yizhibo. In addition to driving traffic to the platform through occasional fan-interaction sessions with movie stars and rock idols, Yizhibo also gives Weibo a cut of the tips that fans give to their favorite online celebrities.

These online stars are less like actual performing artists and often more like fashionistas, filling live streaming sessions with chatter on fashion and makeup trends. They often own or are the front for a shop on an e-commerce site, and have solid bases of fans who avidly tune in to their Weibo broadcasts.

These cyber celebrities, or “wanghong” in Mandarin, have become a key source of income for Weibo. Wanghong typically charge clients 30,000 yuan ($4,350) to 50,000 yuan for each ad published through Weibo, and a third of that is paid to Weibo as commission.

“Weibo has a ‘task system’ that key accounts must use if they want to publish ads,” said Wang Qiandi, who runs a marketing company in Beijing, “ If the platform finds that you are advertising privately to avoid commissions, Weibo will block your posts from your followers,” he said.

Wanghong and other similar accounts also pay generously to get on the hashtagged “trending topics” and “popular accounts” lists to attract more followers. Weibo charges a hefty 870,000 yuan to appear on the trending topics list for one day, according to a price quote shown to Caixin reporters. And that is just one of many Weibo advertising options.

Leading homegrown smartphone brand Oppo paid 1 million yuan to appear on Weibo’s welcome screen for a single day, while a similarly placed drop-down ad on mobile devices costs a whopping 4.5 million yuan. The restaurant chain Supersteak paid 40,000 for the cheapest ad of all, featured under Weibo’s obscure “photo album” page for one day.

These campaigns are worth every penny, according to Oppo, a frequent patron of Weibo ads. It has built an impressive fan base through such campaigns, helping to propel it to China’s most popular smartphone brand with assistance from celebrity spokespeople like the popular boy band TF Boys.

Soaring Ad Sales

Weibo’s ad revenue has soared by 50% in the last year, and ad revenues from videos now contribute about a tenth of the total. Those newer placement options have played a vital role in weaning Weibo off its reliance on Alibaba, which now owns 30% of the company and whose e-commerce merchants supplied about a third of Weibo’s revenue in 2015.

In the third quarter this year, revenue from Alibaba merchant ads comprised just $9.3 million, or 5%, of Weibo’s total, compared with $32.5 million a year earlier, as wanghong, brands, small businesses and marketing firms paid up.

Though advertising revenue is rising steadily, Weibo is still at a disadvantage compared to the much-larger WeChat. According to a Caixin survey, marketing companies spend about 20% to 30% of their budget on Weibo exposure, while they tend to spend more freely on WeChat.

Though WeChat key online leaders have far fewer followers than their counterparts on Weibo, they enjoy higher user loyalty and are better at targeting a specific audience, marketing executive Wang said. “WeChat key opinion leaders tend to be more expensive because of the quality of their fans,” he said.

Despite the promising figures, some, like Ding Feng, whose company creates original videos, are concerned that developing a profitable business on Weibo may be difficult.

“It’s true that Weibo brings more than 40% of the traffic, nearly twice that of WeChat, but we’re not making any money from product placements,” Ding said. “There’s a lot of vicious competition from marketing an account on Weibo, so there’s not much to be made after paying commissions. Plus it’s too easy to get ‘unfollowed’ once fans are annoyed by too many ads. ”

Contact reporter April Ma (fangjingma@caixin.com)

 

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