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Virtual Characters and Live Streaming

VTubing is a sizable and rapidly growing sub sector within live streaming.

Virtual Characters and Live Streaming

In 2021, we wrote a newsletter on Virtual Influencers. As a reminder, virtual influencers are digital-only, computer-generated personas who have been designed to resemble real people. This is now a $4.6b market and is anticipated to grow to almost $6b by 2025. These virtual influencers are emerging primarily in the general influencer marketing industry, but in gaming there is a rapidly growing specialization in gaming; VTubers.

VTubers are virtual influencers that are specifically focused on live streaming platforms such as Twitch and YouTube. Given the live aspect, creators often, but not always, use real-time motion capture technology such as Live3D.

Early History


Despite only truly growing in popularity over the past few years, the first VTuber was created around the same time as Twitch in 2011. The first recorded VTuber was a creator named Ami Yamato, who debuted May 18, 2011 on YouTube. In 2016, the first VTuber to go viral (and also use the phrase “virtual YouTuber”), Kizuna AI, debuted on YouTube. This persona was created by digital production company Activ8 and very quickly gathered a following. Within 10 months, Kizuna AI had 2m subscribers and in 2019, became a culture ambassador for the Japan National Tourism Organization.

In the years following Kizuna AI’s debut, there was a large influx in new VTubers. Between May and mid-July 2018, the number of active VTubers increased from 2,000 to 4,000.

Partnered with this surging influx of creators, there were advancements in VTuber technology, particularly in enabling the usage of 3D character models versus 2D and supporting live streaming content instead of recorded video-based content. In July 2018, VTubers had an aggregate 12.7m subscribers and more than 720m views. By January 2020, there were over 10,000 VTubers.

2020 to Now

The VTubing market benefitted from the 2020 gaming and live streaming surge due to the COVID-19 pandemic and subsequent lockdowns. In 2020, VTubers accounted for 114 (38%) of YouTube's 300 most profitable channels, with a total revenue of ~$26m (around half of which came from viewer donations). By August of 2020, 7 out of the 10 top Super Chat (a paid commenting feature on YouTube) earners were VTubers, the lead of which was Kiryu Coco ($800k), created by the Japanese VTuber agency, Hololive.

The same year, several VTubers created by the American VTuber agency, VShojo (Projekt Melody, Ironmouse), started to gain an English-speaking following on Twitch. Ironmouse specifically broke the record for most active subscriptions on the platform in early 2022 (95k), following the departure of the previous record holder, Ludwig, to YouTube (170k).

While the VTuber trend is less popular outside of Asia, there are clear indicators that it has the potential to grow into a large market (globally). Today, the VTuber market is estimated at $4.6b with ~16k VTubers. For context, Twitch earned ~$2.8b in revenue in 2022 and had 7.6m annual streamers.

Are VTubers Good for Gaming?

We believe that there are 3 positive contributions VTubing has to gaming:

  1. Creators using VTubing software can stay anonymous: Using a digital avatar enables independent creators to explore and expand self expression while still remaining anonymous. In our view, it is even more important to highlight that this medium allows them to focus more on content, fan engagement, branding, monetization, and more.
  2. More personable brand experiences: Influencer marketing has continued to grow ($13.6b), however, brands are often subject to the reach and creativity of the creator. Instead, VTubing offers brands the opportunity to create their own content or to partner with VTuber agencies, such as Hololive, NIJISANJI and VShojo. Since content produced by agencies is created by a team of people (versus individuals), it is a safer and more controlled outlet. For example, when Valorant was released in 2020, Riot Games had a very Twitch-specific strategy. They partnered with individual creators to live stream their game to show viewers what gameplay is like and then shared access keys with viewers of sponsored streams. In addition to this, Valorant could have created their own VTuber or team of VTubers who could compete to promote the game and brand.
  3. Derisked campaigns with creators: VTuber agencies, who have teams who each contribute to controlling aspects of each character, derisk variables that are typically associated with influencer partnerships. Live streaming content is created on-the-fly which introduces uncontrollable variables (e.g., teammates in a match, what goes on in game, fan comments). The best creators take those variables and leverage them to create differentiated material. This dynamic content is what makes up a streamer’s brand. However, this can backfire. Given the live format, creators can be taken off guard and say or do something that will instantly be captured by their viewers. Professional teams of creators are less likely to accidentally utter something politically incorrect or socially unacceptable because of the collective cross-checking of teams. Brands who want to explore influencer marketing can instead work with VTuber agencies who have the resources to control every aspect of a stream.

Despite the above points on the benefits and flexibility of working with VTubers, the growth of this subsegment of live streaming raises some key concerns. We see two primary reasons why VTubers may have a negative impact on gaming in the future:

  1. Lack of authenticity: As we highlighted earlier, the most popular VTubers are created by a team of people. As a result, the creator is sharing the voice of an organization, not an individual. While this is beneficial for brands as it gives them more control over the content, the resulting content may have a corporate tone and be perceived as inauthentic. Normal influencers today are powerful due to the amount of trust that their followers have in their brand and their recommendations, but such a strong degree of corporate control in VTubing creates a distinct lack of authenticity.
  2. Social implications: The power that manufactured creators can have on society and culture is very “Black-Mirror”-esque and unsettling. The estimated gender demographic for the VTubing audience is estimated to be 20-30% female and 70-80% male. This is almost the exact opposite of the gender split between the VTubers themselves (78% female, 22% male). This is an unfortunate split/ratio that could have negative societal implications down the road.

This female-creator heavy representation is not a trend that is reflected in the broader live streaming market. In July 2023, 80% of Twitch visitors were male and only 3 of the top 25 most followed channels were women. In 2021, only 3% of Twitch's top earning streamers were women. However, the following year, the VTuber Ironmouse (VShojo) became the most subbed female Twitch streamer ever, and 13th overall at the time (Dot Esports). While the woman behind Ironmouse was an independent prior to signing with VShojo 2 years before, it does raise the question why female characters created by agencies monetize and garner audiences so differently from non-animated female streamers.

Takeaway: VTubing is a sizable and rapidly growing sub sector within live streaming. While this technology creates the potential to activate untapped independent creators and give brands more control of their influencer marketing, this creates content that is distinctly inauthentic. Given the power that traditional influencers have on social norms and culture, the gender disparity of viewership and monetization skewing heavily male likely means that this market may be trending towards questionable motivations. To that end, we expect it to largely be avoided by brands, corporates, and institutional investment groups. In our view, this is a market that we will continue to monitor yet until it is derisked we are unlikely to invest in over the near term.

Virtual Characters and Live Streaming

VTubing is a sizable and rapidly growing sub sector within live streaming.

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