Two years ago, Tencent CEO Jack Ma could have only dared to hope that the free social app they launched under the name Weixin would come to dominate the Chinese social media landscape. A recent announcement that it has 300 million users and counting confirms Weixin’s unassailable position as China’s number one app.
Weixin, which goes under the name WeChat internationally, can attribute this phenomenal success to its chimera-like platform. People can send each other text and voice messages as well as pictures, links and locations. Friends can be added through their QQ or Facebook accounts, their current location or their phone number. For those with a sense of adventure, the ‘shake’ function connects to anybody within a 1000km distance who is also shaking their phone, and the ‘drift bottle’ service initiates completely random encounters.
Indeed, so many people are flocking to use WeChat that China’s state-owned telecom companies blame it for the decline in SMS texts sent. China Mobile, China Unicom and China Telecom collectively demanded subsidies, either from the government or from Tencent. Tensions escalated over the past few months, with the Ministry of Industry and Information Technology signalling that WeChat would have to pay fees. Following widespread online outrage, this statement was withdrawn.
Tencent has stated repeatedly that it will not charge WeChat users, as subscription based models or single payments would drive users towards the other free apps. Tencent has not made any profit from its golden child yet, so they must find another way to monetize. It has started looking instead at the app’s huge potential for marketing and e-commerce as the next potential source of income.
A recent report by McKinsey found that social media has a greater influence on the purchasing decisions of Chinese consumers than anywhere else in the world. 74% of WeChat users are in their 20s and the majority own the smartphone necessary to use the app, meaning that a huge pool of disposable income is potentially just a personal message away. WeChat is capitalizing on this by creating an ‘official account’ feature. These are used by celebrities and companies to directly reach fans and customers using ‘moments’, messages and photos. WeChat are even currently rolling out the beta version of a service which allows companies to create custom menus. These would provide a link to the official site and list the closest shop locations.
One company which has successfully utilized their official account is Starbucks. Their WeChat campaign invited users to share an emoticon with the Starbucks official site, and they would receive a song through WeChat that reflected the mood of their emoticon. 238,000 emoticons were sent within the space of just a few months. This was undoubtedly a triumph but marketing departments have to be careful not to inundate people’s mailboxes with advertisements; too many adverts and people might stop reading, or indeed turn to another, less commercialized app.
WeChat will have to be careful in how it treats its 300 million users. The company faces three potential checks to its meteoric rise: competition, censorship and cyber-security. E-commerce giant Alibaba’s recent investment in Sina Weibo represents a significant threat to WeChat’s commercial ambitions. Alibaba and Sina Weibo plan to integrate their services, essentially providing a comprehensive mobile platform for both socialising and shopping. In this battle WeChat has a significant advantage: many of Sina Weibo’s users are ‘zombie’ users who rarely, if ever, use their accounts. However, the fact that there is presently no option to make purchases through WeChat may have a future impact. Tencent is no doubt considering its popular ‘Tenpay’ online payment service as another addition to WeChat, although nothing has currently been announced.
This competition means that the smallest mistake could make the difference between a universally adopted app and a passing fad. As a result, concerns about censorship and cyber security become crucial. The Chinese service blocks certain banned phrases and users share their personal information with the company in order to set up an account. This has not affected the number of Chinese users signing up, but as WeChat starts to implement plans for worldwide expansion, it will start to become a problem. WeChat claims that it does not censor phrases in the international version, but a ‘glitch’ in the system which prevented the phrases ‘Falun Gong’ and ‘Southern Weekend’ from being sent would suggest otherwise. Furthermore with headlines warning against a Chinese cyber-security threat, users around the world may not be comfortable sharing their personal information with a Chinese company.
[Source: Value2020]
Despite these impediments, WeChat has already had a measure of success abroad. There are already 40 million foreign users, 1 million of whom are in Malaysia. So far, the expansion strategy has been either to find local partners or to establish joint ventures. Tencent in India is supported by the Ibibo gaming site and a strong partnership exists with Thailand’s largest web portal, Sanook. Plans to work with Indonesian company MNC Media to establish a joint venture were announced this year.
WeChat has engaged in an aggressive marketing strategy in Indonesia; a tactic which has been staggeringly successful. After a celebrity-filled television ad campaign, daily sign-up figures reached 90,000. However, WeChat’s ambitions are not limited to South-East Asia; they aim to become an international brand. In addition to targeting the Middle-East with an Arabic version of the app, they plan to penetrate further into America with the establishment of a WeChat customer service centre in America.
The main advantage of the WeChat app internationally is the integration of Instant Messaging with social networking via streaming content feeds and location plug-ins; no other app combines these features as successfully. As WeChat starts to invest in international markets and starts monetizing, the challenges it faces will be decisive. One eye will be trained on the fates of previously popular social networks and messaging services such as Myspace and MSN Live Messenger. Their decline has opened the market further for WeChat, but they also stand as a testament to the fickle loyalties of social media users around the world.