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Business trends

Former Line head draws on Chinese cash to spread Japanese style tips

Online video startup C Channel pulls in Legend Capital and other investors

C Channel chief executive Akira Morikawa, pictured at the company's Tokyo office on June 15, has led the startup into 10 Asian markets. (Photo by Hiroshi Endo)

TOKYO -- A veteran executive of Japan's most popular online chat service is out to make his mark in Asia with a fashion-focused video startup, and he is doing it with a helping of Chinese cash.

Akira Morikawa served as president of Line from 2007 to 2015. The chat app operator has been pushing into other Asian markets, and Morikawa has been leading his new venture -- fashion video site C Channel -- out into the broader region as well.

So far, C Channel has expanded into 10 markets including South Korea, Taiwan, Thailand, Vietnam and Indonesia. But China is the big prize.

"China is the market we should focus on the most," Morikawa told the Nikkei Asian Review in an interview. C Channel, which distributes fashion and lifestyle clips geared to young women, has secured investment from Chinese venture capital fund Legend Capital Management and other parties to help it cultivate China, along with opportunities elsewhere in Asia.

C Channel used the money to acquire Shanghai-based e-commerce website operator Luce Networks, in a deal announced in May. Luce focuses on beauty goods.

Morikawa established C Channel in 2015 to spread Japanese lifestyle advice through short video clips and sell related goods. Its videos include makeup tutorials, along with cooking and diet tips for young women in their teens and 20s. The site works with 500 female "influencers" in Japan who edit content on their own. From the start, C Channel has focused on vertical clips, as opposed to the horizontal videos that are more popular in Japan.

C Channel distributes short clips offering style advice for young women. (Photo by Ken Kobayashi)

C Channel generates revenue by advertising beauty and lifestyle products and through e-commerce sales. It offers its own app, which is available in English, traditional Chinese, Thai and Indonesian. But since it is difficult to cultivate overseas markets alone, the company has made a point of establishing a presence on social networks like Facebook, Twitter and Weibo. Worldwide, it counts 25 million fans on social media.

In China, the strategy of using influencers, or wanghong, is widespread. This means there is plenty of competition. Still, few companies produce content with the care of C Channel, which takes pains to teach its influencers about filming and editing techniques.

C Channel also works with well-known Chinese short video platforms like Miaopai as much as possible, increasing its competitiveness.

Plus, the startup has a powerful Chinese backer in the form of Legend -- one of the country's biggest venture capital players and a member of the same corporate family as technology company Lenovo Group. Although C Channel has not revealed the scale of its fundraising round, it is believed to have been over $10 million.

The benefits of working with Legend are not limited to money. The relationship also brings valuable connections. The Japanese startup is to set up an official presence on iQiyi, search giant Baidu's video platform subsidiary, as early as next month.

"I met the chief executive of iQiyi, whom I would never be able to meet without a special connection," Morikawa said.

Explaining the Luce deal, he said, "We focus on e-commerce because the advertising business is very difficult in China." He cited the low credibility of vital figures like page views as one reason why.

"We are considering how to use Luce," Morikawa said. "We can send customers from our apps and official accounts to it."

While its earnings have not been disclosed, C Channel appears to be generating several billion yen, or tens of millions of dollars, in revenue in Japan. "Revenue in China will exceed that in Japan as early as next year, considering the speed of growth in China," Morikawa said.

While C Channel is primarily focused on East Asia for now, it is laying the groundwork for growth farther afield. The company has just launched a database of 500 influencers in Indonesia, offering companies a way to promote themselves in the country of about 260 million.

"In Southeast Asia, the low price requirement is very strong," Morikawa said. "So we are seeking profitable business models."

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