It is the software which is being used by virtually all young people in China to connect to one another and share their lives. It is a god-send for foreigners looking to connect cheaply to their friends and family in other cities and countries. It is an easy-to-use, on-the-go voice and text tool, utilised by older generations and active businesspeople for its accessibility. In other words, Tencent’s WeChat is being used by nearly every smartphone-owning group in China, and its rise to the top has shown no sign of slowing.
Last year, the active user base of WeChat tripled from 85 million at the end of 2012 to an astonishing 236 million by the June quarter of last year. People in China often ask for your WeChat account number or name instead of phone number, which is saying quite something.
Whilst wildly popular in China, the app has also garnered significant usage internationally, with its overseas users doubling from 50m to 100m in the space of just four months last year (May to September), with the app having been endorsed by the likes of sports superstars Lionel Messi and LeBron James through advertising. It’s safe to say that the software won’t be falling off the map anytime soon and it has adopted a business model which is increasingly sustainable and lucrative, which will also be discussed in more detail.
So, what exactly is WeChat and why is it so popular?
Looking from the outside, it could be assumed that the application is essentially another app whereby friends can text-chat to one another – either one-on-one or in a group – and that WeChat is merely the Chinese version of WhatsApp or a similar product but with a walkie-talkie. However, WeChat has developed multiple functions which are appealing to the tech-savvy generation of today, continually adding new facets to what it offers its users and thus distinguishing itself from the field in a very big way.
The first major feature of WeChat which is different from its Western instant messaging counterparts is that it has incorporated a Facebook-like status-updating platform named ‘Moments’. Like the social media giant of the West, users can post their photos, feelings and experiences at their fingertips, and the fact it is a mobile-only application encourages on-the-move and instant uploading.
Below is a screenshot of the ‘Moments’ function of WeChat. As you can see, this element is essentially an exclusively mobile Facebook but with Mark Zuckerberg’s platform restricted by the Chinese government, it offers no competition.
As you can see just by glancing at the screenshot, several more features are on offer which earns WeChat its reputation as a hybrid social media app.
Take the ‘Drift Bottle’, ‘Shake’ or ‘Look Around’ (also called ‘People Nearby’ depending on your model) features for example, which add the ability of meeting new people at in an instant. Although this feature may understandably not appeal to all (and if this is the case simply disabling your location services ensures your privacy), in a world increasingly conducting its social relations on a digital platform there is clear demand for these functions, while they also embrace the online dating game in a somewhat similar method as Western-used apps like Tinder. Furthermore, WeChat has incorporated a Skype-style video chat into its functions, again alleviating the need to use apps elsewhere to perform a different function.
Features like this, coupled with the app’s simplicity, are what have helped put WeChat on the map and facilitated the build-up of its massive, unwavering user base. This user base, having now been put into place, is beginning to be offered optional services which involve payment, thus beginning Tencent’s so-far successful monetisation of its users.
So how is WeChat making money then?
Over the summer of 2013, WeChat unveiled an updated version of itself to the Chinese (and international) public through the releasing of WeChat 5.0. The company had, up until this point, been running a free service for all users despite spending mega-bucks on advertising in the West and the Indian sub-continent. An increase in profits was what Tencent required, and it was what it got.
Pony Ma’s Tencent decided to add features to WeChat – such as the ability to access premium mobile social games and the creation of a Sticker Shop – which have seen consumer money trickle the company’s way. Though inexpensive on an individual level, with WeChat’s user base so large it really is easy to see how such simple and completely optional features can create a huge amount of profit. A new online payment system (shown below) easily facilitates user access to these services.
However, the monetisation of the service has not stopped merely at charging users for a few cute emoticons and games, and WeChat’s biggest earner by far since its strategic change has been the introduction of e-commerce onto the app.
From McDonalds to Vera Moda, users are now able to purchase a massive range of commercial products simply by registering their payment details and finding their desired purchases. The success of the addition, which again can be put down to China’s size more than anything, has been undeniable.
Take November 11th for instance. Known as ‘Single’s Day’ in China, the date is marketed as a chance for singletons to splash their cash on themselves online. 2013 represented the first opportunity to really put WeChat’s e-commerce adaption to the test, and it passed with flying colours. Tencent announced that on Single’s Day alone it pulled in over HK$637m (497m RMB) partly due to making its 51buy products available via WeChat, with a very sizeable portion of the income from these sales (roughly 13%) coming directly from the transaction fees it made via WeChat purchases. Though not a huge amount of money on Tencent scales, the figures clearly show the potential of mobile e-commerce on the app.
Though both of Tencent’s Alibaba e-commerce rivals tmall.com and taobao.com can be accessed through a mobile device, neither are anywhere near as efficient, popular or frequented by users as WeChat, giving Tencent a big advantage as it encourages impulsive buying. Tencent’s entrance into the e-commerce market so infuriated Alibaba founder Jack Ma, that he blocked merchants selling goods on its sites from using the WeChat app. WeChat’s success as a commercial tool has really caused a stir.
What about internationalisation? Will WeChat be as successful overseas?
To supplement its expansion strategy, WeChat has continually increased the number of its usable language interfaces over the past year, and is now available in twenty different languages including French, Portuguese and German. It is broadening in terms of location as well as content and accessibility and we predict that it may become one of the first Chinese-born internet applications to truly crack the West.
A stumbling block could be perhaps the West’s tendency to trust its own sphere’s products ahead of foreign ones, and this is an issue WeChat may need to consider and tread carefully around, particularly in light of the stir caused by Huawei in the US last decade. Having said that, the name ‘WeChat’ is anything but Chinese-centric and its features are of course very similar to apps popular in the West, only now they are located in one place.
One thing that can safely be said is that WeChat has yet to reach its peak, the only question is: how high can it reach?
If you have any questions concerning 4G in China or any other issues related to the mobile internet and social media industry, please feel free to email us at info@maxxelli-consulting.com
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