Should brands in China rely less on KOLs?

Li Jiaqi, China's most well-known KOL and livestreamer, found himself in trouble last Friday, June 4, the day of the Tiananmen Square crackdown by the Chinese government. In a recent livestream, Li promoted Unilever-owned ice cream brand Viennetta where he and his livestream partner created an ice cream sundae that resembled an army tank. Li's livestream was taken off the air immediately, and despite claiming he had technical issues on Weibo, the livestream did not return. For context, the tank symbolises the Tiananmen Square crackdown, which remains a taboo topic in China.

Li's saga highlights the implications that brands face in China when working with KOLs. From L’Oréal’s pricing controversy last November to the Viya tax scandal, tension continues to rise between top KOLs and brands. 

Will this force brands in China to rely less on KOLs when it comes to livestream content? Experts from the region weigh in. 

Arthur Altounian, vice president, client strategy and growth, APAC at INCA

Live streamers and live content across the globe must adhere to the social networks' guidelines and terms and conditions, including but not limited to licensing audio and content rights and no IP infringement. In addition, the content and user behaviours must comply with standards that restrict hateful, unethical, unlawful, damaging, and fraudulent product promotion (the list goes on). This applies to all users, not just KOLs. Musk's recent argument on free speech on Twitter should convince platforms and regulators to examine (faster) and better define the obligations and constraints of media and content creators/users. 

As livestreaming, particularly e-commerce livestreaming, is rapidly expanding, there is a need to enhance live streamers' tax obligations to encourage the industry's healthy development. Tax evasion and other wrongdoings should be investigated and dealt with under the law, not limited to live to streams. This applies to all regions and countries. 

According to the China Association of Performing Arts, the Chinese livestreaming business is mature and has been rapidly developing in recent years, with a projected value of $30 billion by 2020. Moreover, regulators are legislating the whole media industry, not just live streaming, which should promote healthy industry growth and expansion. 

Once the regulations are clarified, the overall benefits of live streaming and social commerce gave by KOLs to companies will and should be strengthened. I do not think brands would walk away from the significant benefits of live streaming and KOL input on their performance. 

Jon Brodsky, chief executive officer, YouNow 

KOLs are the latest way that advertisers are trying to cut through the clutter of social media and remind me a lot of how high school fashion works: one cool kid decides something is incredible, and even though that kid is often a jerk, everyone else decides that thing is also excellent. But, of course, brands could never know someone was a jerk in high school, so they just took the money and ran. 

The spats we see in China are a little more nuanced than that but are the same basic idea: brands spend a fortune on their image, and while their image may intersect with that of a KOL, it's never going to line up completely. So brands either need to get comfortable with this or have their employees be their only influencers because there is no middle ground in which a KOL will steadfastly hold a brand's line - that makes them inauthentic and will cost them their following. 

I firmly believe that brands should take a hands-off approach, especially in livestreaming: it's OK to pay a KOL to wear your product, but just like you probably don't like everyone you went to high school with, it would be silly to think that you can control an influencer as well. 

Brands approach this with math by considering the pit fee, commission, and goods discount. With these factors taken into consideration, they might get an even better ROI when launching just a home page banner rather than engaging top KOLs. Plus, many companies just can't afford it anymore. 

So as a result, many brands start their live broadcasts to increase sales across all platforms, but when they do, they also run into problems like no traffic support, no intelligent system, and poorly produced shows. So, it's about looking out for these problems ahead of time to avoid them further down the line for brands.

With the new national tax policy in effect since early this year, some brands also find it more cost-effective to use mid-level KOLs. KOLs are subject to policy constraints and have more of an equal attitude as they work with brands, businesses, and even platforms. High pit fees and commissions will also become a thing of the past, establishing a situation of mutual benefit for all three parties. So, in the future, I believe the partnership between brands and KOLs related to Livestream content will continue in a healthier, sustainable manner. 

Even though it is a new business model, live broadcasts are a long-term trend, and I believe the trend is changing from a situation of barbaric growth to a mature, standardised one. Of course, brands still find it useful, but they may no longer put all their eggs in this one basket. Instead, they would implement it as one of several sales solutions. 

Livestreaming has become a permanent industry in China. Some reports indicate that livestreaming accounts for 10% of all of China's ecommerce GMV. Unfortunately, because of the fast development speed, too many loopholes and grey areas jeopardised brands and livestreamers. However, due to its importance as a sales channel, brands will continue to use livestream KOLs. 

If one KOL should falter, brands would simply switch to another one of the thousands of available choices. This is the same phenomenon as celebrity endorsements—even though Kris Wu is behind bars now, brands are not shying away from employing other celebrities as ambassadors. 

Livestreaming is evolving as a practice. I don't believe that Austin Li's recent problem will force brands to stop working with KOLs altogether. However, it will force brands to evolve their content planning processes. Until now, livestreaming has been treated as media placements—brands pay a certain fee, and the livestreamers deal with the rest. Now, intelligent brands will start getting involved with the actual creative concepts within a livestream program and control the critical moments within each livestream.