Cashing in on stickers

Animated online stickers and graphics of anything under the sun are used by billions of people on their phones every day to express emotions ranging from shock and awe to mock outrage, be it a cat crying with laughter a celebrity with a killer punch line or a dancing baby.

And while most of them are free, there's money to be made by the creators of character-based intellectual properties - which take the emoji to new levels of sophistication - not only in the virtual world but through a variety of merchandise.

There are deep social, economic and cultural factors underlying the popularity of stickers in the mainland, says Han Xiuyun, an associate professor at the Tsinghua University School of Economics and Management.

She says stickers make it easier for people to chat to one another online as those who are not good at tapping out a conversation on their keypads can express a myriad feelings through them, while making the chat more personal.

Take Weixin as an example.

Most of the app's stickers are free but if a particular set proves popular, then Weixin will sell a second collection for just 1 yuan (HK$1.2) and the IP creator will get a commission from the proceeds.

But only three of Weixin's top 100 stickers cost money, and they all come from famous IP creators which originally did not charge for their stickers.

Block 12, an IP platform in the mainland that started out by making stickers for Weixin, received a B round investment of nearly 100 million yuan in 2019, with a total financing of over 150 million yuan. Its investors included ZhenFund and Legend Capital.

Block 12 develops stickers into an IP chain for both the online and offline market. It has more than 100 collections on Weixin, of which just four cost 1 yuan each to download, while the rest are free.

Budding Pop is Block 12's top sticker collection with over 1 billion downloads and its creator has 4.11 million followers on Weibo, China's Twitter-like social media platform.

With over 80 original and collaborative IP characters, including ones from Disney and Detective Comics, Block 12 gained a large fan base through the creation and distribution of stickers on the internet before opening 30 retail stores across 18 cities in China for their IP merchandise.

But Weixin's own "yellow-face" stickers have not enjoyed the same success as Line Friends, a pioneer in online stickers, whose first IP characters - Cony the rabbit, Sally the chick, Brown the bear, and James, a young man - took the sticker world by storm.

South-Korea based Line Friends was part of Japanese instant messaging app Line, which listed on the New York Stock Exchange in 2016. At the time, US$268 million (HK$2.10 billion), or a quarter of Line's revenue, came from the creative firm's IP character stickers.

The creative studio became independent in 2015 and went on to open retail stores across the world featuring its IP toys and apparel, while partnering with leading brands such as Uniqlo, B&O, Lamy and even phonemaker Xiaomi (1810).

By the end of 2018, Line Friends had 42 shops worldwide. It even entered China though the app is not available there and at one time had as many as 12 stores in the mainland.

And Line's revenues from its Line Friends segment surged 31 percent and 59 percent for two consecutive years in 2017 and 2018 to 12.29 billion yen (HK$830 million) and 19.57 billion yen respectively but started to fall in 2019.

Line Friends meanwhile began to close underperforming stores and last month, it closed its last retail store in China in the city of Chengdu and revealed it would now focus on developing its online business in the mainland.

Line Friends was a success because at the outset it engaged users with a series of short animated films featuring its character IPs while Weixin did not create any such emotional link, and this could be a reason why the latter's stickers never became part of its core business.

Now, after transforming its offline business to digital, and with total IP transactions hitting US$883 million in 2021, Line Friends has changed its corporate name to IPX to position itself as a digital IP platform company to enter the IP-based metaverse and NFT business.