The wanghong economy refers to the Chinese digital economy based on influencer marketing through social media platforms. Wanghong () is the Chinese term for internet celebrity. Chinese wanghong celebrities attract the attention of internet users, which can translate into profit through e-commerce and online advertising.

According to CBN Data, a commercial data company affiliated with Alibaba, the Chinese internet celebrity economy was estimated to be worth ¥58 billion RMB (US$8.4 billion) in 2016, which is more than China's total movie box office revenue in 2015.

Business model Online retail Wanghong celebrities use social media platforms to sell their self-branded products to their followers via Chinese customer-to-customer (C2C) websites such as Taobao. These celebrities promote their products by posting pictures or videos of themselves wearing their merchandise or giving makeup or fashion tips. Chinese e-commerce internet celebrities serve as key opinion leaders (KOLs) (known in English as "influencers") in online retail. As influencers, wanghong can shape their followers' fashion and lifestyle choices. In order to emulate their favorite wanghong, followers become loyal consumers.

In this business model, consumers are essential in driving the products and helping brands thrive. Through social media, consumers can impact the success or failure of online stores, products, and brands. These types of consumers are considered prosumers or "professional customers." New forms of consumption disentangle themselves little by little from rigid social stratification and end up being governed by fashion trends and experts who provide good taste and chic outfits.

Zhang Dayi (张大奕) is one of China's best-known wanghong according to BBC News, with 4.9 million followers on Sina Weibo as of 2016. Zhang has an online shop on Taobao, through which she reportedly earned ¥300 million RMB (US$46 million) per year, compared to US$21 million made by Fan Bingbing (范冰冰), a top Chinese actress.

In 2015, Alibaba's Singles' Day sales reached a record of $14.3 billion, with most revenue coming from its online retail platform, Taobao; five of Taobao's top 10 best-performing shops belonged to wanghong.

Social media advertising The foundation of social media advertising is content, which is central to the wanghong economy. Wanghong use free original information to attract netizens' attention and influence their habits. These internet celebrities have broken the monopoly of traditional media. They have thousands of followers and can influence purchasing behavior.Gillmor, Dan (2004). We the Media. O'Reilly.

Products in the wanghong economy are usually advertised in two ways:

Paying internet celebrities to advertise products: When internet celebrities have enough followers, some companies may contact them for advertising. For example, in 2016, inserting an advertising video in Papi Jiang's (papi 酱) internet video program cost 22 million yuan. Some manufacturers will set up new brands designed around internet celebrities. The manufacturers supply the product and rely on the influencer to market the products to their fans. For instance, Zhang Dayi (张大奕), a famous fashion internet celebrity on Sina Weibo, reports her brand's annual sales are over 1 million pounds.Wei, Ran (2016). "网红经济热现象分析". Theoretic Observation. 09: 54–55. Styling official company accounts as influencer account: For example, Bowu (博物) Magazine has 6.2 million followers, Gugong Taobao (故宫淘宝) has 670,000 followers, and Haier (a consumer electronics company) has 580,000 followers. These company accounts will post advertisements, but also focus on attracting new followers. They will communicate with their followers and create topics to encourage discussion. An aforementioned example is Bowu Magazine, which is a nature and science magazine. To imitate an internet celebrity, the magazine identified as different species for netizens from a first-person perspective, attracting the attention of users. This method was a success, and the number of followers of Bowu Magazine increased dramatically from 800,000 in January 2015 to 6.2 million in March 2017. At the same time, the circulation grew from tens of thousands to 220,000 in 2015.Huang, Guiping; Wang, Andi (2016). "The strategy of popular science magazines' brand building: taking the new media operation of Bo Wu magazine as an example". China Academic Journal Electronic Publishing House. 12: 1334–1338.

Different wanghong celebrities have different styles, as do their fans or followers. This makes it is easy to differentiate the needs and characteristics of different groups. Then companies can choose target audiences for their product. To satisfy the needs of targeted customers, internet celebrities can enhance the accuracy of advertisements. This differs from traditional celebrities because followers may feel that influencers are closer and more accessible, so more followers can be converted into buyers."精准营销迎来市场风口:自媒体+网红联动传播". PRWorld. 06: 12–13. 2016.

Live advertising

'Live+E-mall+Wanghong' is a new advertising model in the wanghong economy. This advertising model can create a platform for followers to communicate with Wanghong. Ads can be integrated into the program's content so it is less obvious to viewers. For example, in 2016, Baicaowei (百草味), a snack company, increased sales fivefold during the 618 shopping festival compared with the previous year after working with a famous wanghong called Shenman (沈曼)Cao, Xiaofang (2016). "粉丝经济下网红的商业模式发展". Business. 23: 147. who is from YY, one of the largest livestreaming platforms in China.

Digital marketing Digital marketing is used in many aspects of the creation and development of a wanghong.

Companies use internet celebrities to attract attention or to create content. Internet celebrities have talents and skills involving beauty, fashion, food, life, humor, education, and music. They develop a fan base who follow that wanghong's words and actions. Since the commercial value of internet celebrity has been recognized, the commercial production of new Internet celebrities has also appeared. There are professional internet celebrity "packaging" companies to manage potential and current wanghong. These professional internet celebrity companies can transform celebrities' fans into consumers.

Today, internet celebrities are often viewed as personal brands, which can be produced and developed by effective marketing.

Digital marketing strategy A digital marketing strategy involving a wanghong can be divided into the following steps. In the creation phase, the company locates an internet celebrity, considering the characteristics of potential candidates and their target audience. The next step is to increase awareness and influence. Internet celebrities should accumulate a large number of fans in this step. The ultimate goal of the wanghong economy is to transfer Internet celebrity awareness into revenue. Therefore, the more loyal fans an internet celebrity has, the higher the income they may generate. After the internet celebrities have been created and have amassed fans, the marketing strategy focuses on protecting their public image, avoiding the celebrity's losing fans.

Digital marketing methods The media of digital marketing can be mainly divided into Social Networks, video websites, search engines, news portals and e-commerce websites. For social network websites like Facebook, Twitter, Instagram and Weibo, an internet celebrity can cooperate with the site to push their content to their target audience. As for search engines like Google, Bing and Baidu, internet celebrities can place ads to appear in related searches or rank higher in search results. Video websites like YouTube and electronic business platforms like Taobao are also important ways to market internet celebrities. The advertising revenue from video websites and sales from an online shop are the primary ways Internet celebrities make money. They can spend money to promote their videos or stores on a website's homepage to attract more viewers.

Moreover, Internet celebrities are also a type of self-media, as they are a widely seen communication channel. These celebrities can spread messages not only to their fans, but their fans can also carry their messages on to others. If an internet celebrity company manages multiple wanghong, the different wanghong can recommend each other's content to their fans.

Global context

Digital A report from the China Internet Network Information Center showed that in 2015, Chinese people spent 3.75 hours online daily. By June 2014, there were 632 million Internet users in the country and a penetration rate of 46.9%.

The rapid uptake of smart devices in China is critical because it created a foundation for developing the digital consumer market. There were 80 million smartphones in circulation in China in 2010, which skyrocketed to 580 million units in 2013 and is expected to increase further to over 1 billion units by 2016. There are 650 million mobile internet users, 350 million smartphone subscribers and 290 million active WeChat users.

The internet can create markets for products and service offerings that did not exist. A report from the McKinsey Global Institute says that E-commerce can change the retail sector, leading to greater consumption for these services. These digital consumers can have more sophisticated consumption habits than Chinese consumers in the past. To be successful, enterprises can attempt to understand their customers and offer a unique experience, which may require getting insights about them.

Youth consumption According to a 2015 study of internet users The Post-90s people of China depend on smartphones, appreciate a diversity of tastes, rely highly on social media, and are keen online shoppers. They pursue youthful fashion, are self-centered, are rational consumers, desire novelty, thirst for knowledge, try to outdo others, and are impatient. They have strong consumption desires. They prefer new advertising methods over traditional marketing.

Wanghong were perceived to be more authentic and less distant compared to conventional celebrities by the post-90s generation. Overwhelmed by the variety of products available, wanghong act as opinion leaders in their unique fields. Through videos on makeup and fashion and by giving tips and advice, wanghong play a role in the purchasing process and act more like an authority on such products.

Chinese consumer culture

Demographics and consumption

Increasing demand for consumption in China is caused by two major factors. One is an increase in population and the other is growth of the economy and higher disposable income. Average GDP per capita rose at over 9.8% annually for 30 consecutive years, enabling China to become the second largest economy in the world in 2010. As China's living standards rose with economic growth, Chinese consumers' shopping habits have changed, and more consumers are able and willing to spend more on goods and services.

Wanghong online shops have low prices and fashion styles that appeal to Chinese consumer psychology and mass consumption. With the potential of more than 1.3 billion consumers, China's domestic market presents buying power.

Culture

Collectivism