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WeChat Flourishes At Home While Tencent Invests Abroad

WeChat, known as Weixin (pronounced way-sheen) in Chinese, was born as a WhatsApp copycat. That copycat has since baffled other giant social networking companies like Facebook with its all-in-one approach to messaging and apps.

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The Chinese super app offers users a platform through which they can do almost anything online. As a result, it has woven itself into the fabric of everyday Chinese society.

WeChat is the primary means by which mainlanders communicate with family, friends, colleagues, and employers. According to The Economist, over one-third of WeChat users spend more than four hours in the app each day.

So how did this monolith of an app come to be, and how is it faring against regional and global competitors?

WeChat And Its Global Counterparts

According to App Annie, as of January 23, 2018, WeChat ranked number three on the app store in China overall and number one among social networking apps in China and Macao. Since the app launched in January 2011, WeChat’s number of active monthly users has grown from 2.8 million in Q2 2011 to 963 million in Q2 2017 according to Statista.

This massive growth was propelled by the unique economic and political atmosphere in which the company was created. Facebook, Twitter, and other social media sites were blocked in China in 2009 due to Chinese government concerns over content control. Tencent, which started as an online chat room platform called QQ, leveraged those users and capitalized on the social media gap to start WeChat.

But Tencent didn’t just have state policies that blocked competition on its side. In 2011, China was home to 1.3 billion people, most of whom use their phones to browse. Tencent also had China’s substantial mobile Internet population to tap into. In 2016, The Economist reported that “more Chinese reach the internet via their mobiles than do so in America, Brazil, and Indonesia combined. Many leapt from the pre-web era straight to the mobile internet, skipping the personal computer altogether.”

This mix of state-restricted competition, played out in favor of Tencent, and a large mobile user base hungry for their devices to do more, has created a network that’s moved far beyond messaging.

WeChat Becomes More Than A Social Network

Tencent transformed WeChat from a messaging app, like Whatsapp, into a monetized social media platform where third-party developers and businesses can directly access the Chinese mobile Internet market. Like Facebook, companies run targeted ads and connect to consumers through official accounts. Within the same environment, customers can conveniently pay for goods or hail a taxi.

In January 2017, Tencent took its innovation a step further when it began allowing individuals to instantly download and operate simplified apps—mini-programs in WeChat parlance—within WeChat’s interface. The data from the apps is stored along with WeChat data. The company said it believes the program will “provide more venues for users to sample functionalities offered by apps and thus increase the conversion rate for app downloads.”

According to Business Insider, WeChat now boasts an offering of 580,000 mini-programs on the platform in just one year since its launch. It is estimated that 95 percent of ecommerce brands in China have created a mini-program.

However, just because Tencent has a goliath in WeChat doesn’t mean there isn’t worthy competition.

Competition Close To Home

Tencent isn’t the only company that caught on to the all-in-one app idea. Tokyo-based Line launched an investment fund in 2015, Line Life Global Gateway, to transform its messaging service into a platform like WeChat. Later that year, it started its taxi hailing service in Japan, and in 2016, it began offering “Line Man,” a regional on-demand delivery service.

The company went on to raise $1.1 billion in its dual NY-Tokyo IPO in the same year. Line has also attempted to take its success global, launching its platform outside of Japan and investing in startups abroad.

In Q2 2017, the company boasted 169 million monthly active users in its Japan, Taiwan, and Thailand markets according to Techcrunch. Though that number is quite lower than WeChat’s 938 million, taking into consideration global competition, its success is relatively significant.

But how does Tencent’s WeChat stack up to the West, where the real global social networking giants lie?

WeChat’s Competing Western Heavyweights

Facebook-owned WhatsApp, the global heavyweight in the messaging service industry, had a monthly active user rate that grew from 200 million in April 2013 to 1.3 billion in July 2017, according to Statista. Facebook Messenger, on the other hand, had an active monthly user total of 200 million in April 2014 which grew to 1.3 billion monthly active users by September 2017.

Even with these huge global user numbers*, Facebook Messenger and other players, like Apple, have joined the competition to become the “WeChat of the West.”

For instance, Facebook Messenger made direct payments available back in 2015, and it officially made games available within its app in May 2017. Similarly, Apple iMessage began to allow its users to access the system’s Game Center within the messaging interface when it rolled out iOS 11 in September. iMessage also supports in-message payments through Apple Pay.

However, these companies have failed to concentrate core services, such as requesting an Uber, in a messaging product—making the unique atmosphere in which Tencent designed and implemented WeChat all the more notable.

But although Facebook and Apple have struggled to import lessons from WeChat to their local markets, Tencent has equally struggled in exporting its successful all-in-one strategy to western markets.

Tencent Invests Abroad

Aside from the potential for expansion in smaller countries with a promising mobile Internet market, like Malaysia, Tencent has focused its efforts for WeChat abroad on Chinese travelers. The company has made the WeChat payment system available in 14 countries outside of China, allowing foreign brands to appeal to the rising tide of traveling Chinese consumers.

Beyond mainland borders, however, Tencent has focused its expansion on investing in global WeChat competitors. Tencent invested $50 million in a Series D round for competing messaging platform Kik. In the announcement of the deal, Kik CEO, Ted Livingston, explained that “with so much of their focus on winning China, [Tencent will] support Kik running independently to win the U.S.”

Similarly, Tencent invested in another messaging platform in India called Hike. The social messaging startup raised $175 million in a Series D funding round in August 2016. Hike has also implemented a payment system. The startup launched its “Blue Packet” project which mirrors WeChat’s red envelope project. Through the project, friends and family members can send each other gifts through an embedded payment system.

It seems likely that Tencent will continue to focus WeChat’s efforts on further satisfying the needs of its Chinese mobile internet user base and keeping Alibaba at bay. On the global end, it will be interesting to see if Tencent’s influence through messaging platforms abroad, like Hike, will give WhatsApp and Facebook Messenger a run for their money. The WeChat of the West may not actually be WeChat, but it may well end up being a China-backed messaging underdog.

*WhatsApp was not widely blocked in China until September 2017. The data for both Facebook Messenger and Whatsapp is inclusive of all global users. 

iStockPhoto / BrianAJackson

 

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