With 92 percent of the country’s viewers watching content on dedicated video websites and related apps in Q4 2016, China is entering a golden era of entertainment consumption, characterised by consumers’ growing appetite for quality, catered content, and the convergence of multiple devices.
For marketers, these developments are sharpening the country’s advertising opportunities, and online video platforms—in particular, iQIYI—are exploring new content marketing channels in close collaboration with brand owners.
According to an iResearch study, China’s online video advertising sector reeled in Rmb33.4 billion (US$4.9 billion) in revenue last year, and iQIYI is no longer limiting its reach to video hosting alone. The platform is utilising its dedicated user base and massive content library, and making a mark with its iJOY marketing model (see overleaf).
iQIYI’s CMO, Vivian Wang, explained how at the iJOY marketing conference held in Beijing in June: “There’s a new market for video, where advertising and content have fused, and consumers are highly engaged with the medium. Aggregation is getting more personalised and efficient, subcultures like anime and hip-hop are finding an audience on our channels, short videos have shown rapid growth, and in-feed ads are booming.”
CMO Vivian Wang speaks at Beijing's iJOY marketing conference
Owning the entertainment value chain
iQIYI currently boasts 310 million daily active users, including 150 million on mobile. This places it at the top of China’s video-streaming industry, and a healthy second in the app industry when ranked by engagement time, trailing only WeChat. Founded less than eight years ago, the video platform has a footprint worthy of a closer look.
“We’ve developed a ‘one dish many ways’ business model for content producers,” says CEO Tim Gong. “Whether it’s advertising, paid membership, franchising, copyright sales, gaming or ecommerce, it’s the same recipe throughout—distribution and monetisation.”
Original content generates more traffic and has long-term business value. And platforms that once prided themselves in streaming video are gaining an advantage when they also take charge of the production and creative direction of their content.
iQIYI is an exceptional case study for this: seizing this opportunity, it has invested heavily in its own native content with a healthy ecosystem behind to support its growth expectations.
Xiaohui Wang, chief content officer at iQIYI, said that investing heavily in its HEAD IP (intellectual property) content—its top-tier content, that which receives the highest popularity scores and largest audience size—is part of its content strategy.
Wang estimates that—in addition to the 90,000 independent videos produced daily over 30 channels—iQIYI is ramping up its in-house offerings “producing 1,000 hours of HEAD content throughout 2017”. He has high aspirations for iQIYI: “We are establishing ourselves as the best online-streaming platform, the best player in internet native content production, and the best ecosystem of content.”
iQIYI partners with Xiaomi, vivo, Yum!China, VIP.COM, and FAW-Volkswagen at the iJOY marketing conference in June
Capitalising on star power
iQIYI’s content investments are a unique strategy: the group now relies on its star-making power with new talent, going so far as to double-up as talent scout and employer. Because of its grassroots approach, iQIYI-only dramas, IP-based dramas, and internet-native dramas are in high demand.
In 2016, iQIYI produced 25 original internet dramas that generated 31.2 billion click-throughs. Its content was ranked No 1 by weighing more than one third of all internet dramas in China.
Ying Dai, vice-president and general manager of internet dramas at iQIYI, explains the approach: “We don’t just stand backstage, we collaborate with film production teams in their search for promising actors. We want to communicate with these individuals at the start of every new project, and nurture them on their journey to the screen.”
iQIYI now commissions multiple-season productions to maintain quality—a technique popular TV shows in the US use. Episodes are released on a weekly basis by design.
In addition to new talent, well-established actors and hosts also co-produce iQIYI’s original content. Bin Jiang, vice-president and general manager of programme development at iQIYI, said of the effort: “Celebrity-produced shows and IP-extension shows are two drivers of our internet variety shows.” IP-extension shows refer specifically to subsequent seasons of successful variety shows, which drew in extra large audiences for iQIYI, garnering 7.1 billion views in 2016 with an advertising revenue of Rmb2 billion.
 “Aggregation is getting more personalised and efficient, subcultures like anime and hip hop are finding an audience on our channels, short videos have shown rapid growth, and in-feed ads are booming”
Vivian Wang, CMO at iQIYI
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 “We are establishing ourselves as the best online-streaming platform, the best player in internet native content production, and the best ecosystem of content”
Xiaohui Wang, chief content officer at iQIYI
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 “We don’t just stand backstage, we collaborate with film production teams in their search for promising actors”
Ying Dai, vice-president and general manager, internet dramas at iQIYI
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 “Celebrity-produced shows and IP-extension shows are two drivers of our internet variety shows”
Bin Jiang, vice-president and general manager, programme development at iQIYI
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Creating a content atlas
From in-feed ads and offline events, to licensing opportunities, iQIYI’s iJOY marketing model has opportunities across the map of content:
IP crossover: iQIYI’s marketing capability provides greater flexibility for brands, allowing them to reach a wide range of consumers across a variety of online mediums by implementing pan entertainment strategies. “Successful companies that deal in media are knocking down their long-standing silos of film, TV, literature,” says Michael Chen, vice-president of sales at iQIYI. “Pan entertainment is the new standard. We’ve constructed a comprehensive upstream-to-downstream production chain to live among video: literature, animation, ecommerce, gaming, and other formats.”
IP soft-embedment: Video ad spots—regardless of their placement—are easy for viewers to skip, and likely come off as a hard sell. Rather than disturbing users with a 30-second ad spot wedged haphazardly within a video, iQIYI vouches for a more fluid process for embedding branding. Brands make their home on iQIYI through mediums such as well-placed mascots, on virtual goods in a mobile game, or featuring as a location in their latest miniseries.
O2O interest flow: Online-to-offline experiential marketing is paramount in providing a closed-loop content experience for consumers. iQIYI has taken to the ground with offline events for its 523 million online users, including iQIYI Comic-Con, iQIYI All-Star Carnival and iQIYI Summer Operations.
Completing the communication cycle, users can also engage through ‘Bubble Circle’, the company’s built-in SNS system—314 million of iQIYI’s users are under 30, and 35 million of those younger users engage daily on the platform.
Chen believes that targeting the younger demographic means keeping communication portals open. “We’re currently in the age of Marketing 2.0, where online and offline worlds feed each other reciprocally. Our face-to-face events and Bubble Circle facilitate engagement, and we’re eager to dive into Marketing 3.0, where innovative technology like AR and VR play a more powerful role throughout.”
iQIYI’s integrative marketing solutions tap into entertainment trends
IP licensing: “While Hollywood gathers 70 percent of its income from licensing, the sector only accounts for 2.5 percent of income in China’s film industry,” explains Jared Ren, vice-president of licensing at iQIYI. “This signals a massive opportunity for growth in the coming years. It’s green lights all the way for us.”
Brands like Disney and Marvel have established vast and diverse content libraries built on characters whose emotional resonance spans decades. iQIYI seeks to build this same rapport with audiences through content collaboration, a strong digital presence, retail goods, offline entertainment and even a planned theme park based on iQIYI content.
‘IN’ advertising: “iQIYI pursues marketing with the aim to combine brand and conversion,” says Frankie Fu, vice-president of sales at iQIYI. Along the way, the company’s DMP leverages automatic tags powered by big data, collecting user interests to increase the precision of audience targeting.
As a product of these developments, iQIYI has seen an increase in programmatic buying, and has committed itself to setting benchmarks for transparency, accurate metrics and brand safety across its services and the market as a whole.
In-feed ads: iQIYI is the first player in the online streaming industry to release in-feed ads as a major advertising strategy. The sector subsequently saw 2,000-fold growth in just one year, opening the doors for brand conversion.
Fred Mao, managing director, corporate development sales department at iQIYI, outlines the native advertising landscape in China: “The country now has 665 million mobile netizens, which makes up 95 percent of all Chinese netizens. Knowing this, a rapidly growing number of SMEs have laid a solid foundation for the explosive growth of in-feed ads, and independent research shows that 50.4 percent of mobile users are in favour of these ads.”
 “We’re eager to dive into Marketing 3.0, where innovative technology like AR and VR play a more powerful role throughout”
Michael Chen, vice-president, sales at iQIYI
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 “While Hollywood gathers 70 percent of its income from licensing, the sector only accounts for 2.5 percent of income in China’s film industry. This signals a massive opportunity for growth in the coming years”
Jared Ren, vice-president, licensing at iQIYI
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 “The country now has 665 million mobile netizens, which makes up 95 percent of all Chinese netizens. Knowing this, a rapidly growing number of SMEs have laid a solid foundation for the explosive growth of in-feed ads”
Fred Mao, managing director, corporate development sales department at iQIYI
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 “iQIYI pursues marketing with the aim to combine brand and conversion”
Frankie Fu, vice-president, sales at iQIYI
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