Virtual idols win heart of Chinese Gen-Z, create commercial opportunities

An increasing number of "virtual idols," meaning artificially created online influencers, are gaining popularity among consumers in China, motivating countless companies to explore in the sector for the rising commercial opportunities.

The virtual idol industry in China earned 3.5 billion yuan (about 547 million U.S. dollars) in 2020, with a year-on-year growth of 70.3-percent as the market is expected to be worth over six billion yuan this year, according to research firm iiMedia.

Virtual idols can talk, sing, dance, and appear on reality television programs to cater to wide range of real fans willing to support them, which has been encouraging numerous companies to use the idols for promotional needs.

A virtual idol named Shen Xiaoya, who hosted news broadcasts last year, was hired by the Shanghai Media Group, a mainstream television broadcaster in the Shanghai Municipality of east China.

China's virtual idol industry has rocketed to an estimated market value of 6.2 billion yuan (about 0.97 billion U.S. dollars) in just nine years as the first generation of Chinese-speaking virtual idols were created as singers in 2012. At that time, the market was mostly dominated by a Shanghai-based IT company Henian, and a singing synthesizer called "Vocaloid", which was developed by Japan's Yamaha. The two companies co-created popular virtual singers such as Luo Tianyi, Yan He, and Yue Zhengling.

Virtual idols have come out as various Metaverse characters over the recent two years partly thanks to the growing 5G networks, AI and VR improvements. The sector has continued to gain attraction as anime-centered video platform Bilibili invested heavily in Henian and eventually became the company's largest shareholder in 2019.

Lu Gang, the founder of technology news website TechNode.com, said that the concept of the Metaverse has helped to create more possibilities for virtual idols.

"We are now talking more about the concept of Metaverse. It refers to a future iteration of the Internet, made up of 3D virtual spaces linked into a virtual universe. For example, the VR games now are based on the concept. And with the development of hardware and software, there are more marketing strategies based on it. Virtual idols are one of those things based on the Metaverse concept. And in addition to the virtual idols, we also have virtual artworks now. And there will be more to come in the future," said Lu.

The rapid growth of the virtual idol industry in China also has other motivations behind it, according to Jin Yuchen, the CEO of China's social app AlphaLink.

"First, on the supply end, the companies are more used to using these virtual idols because obviously using virtual idols are much less expensive than using human idols, and there is a cost reason. And also, on top of that, it is a lot safer to use virtual idols in marketing campaigns because you don't know when your human idols are going to get into the next big scandal. And when that happens, all the fans suddenly become haters. You don't have that problem with the virtual idol," he said.

Jin also mentioned that generation Z as a large number of consumers in the virtual idol industry as they grew up watching Japanese anime.

"We have a whole generation of young kids who grew up watching anime. And these characters, whether 2D or 3D, they are characters they can easily relate to. So the Generation-Z kids are becoming new independent consumers. That's why they are playing a greater role in the consumption game," he said.

An increasing number of brands and content platforms favor this growing medium as they want to build a connection with the digitized younger generation.