How hot is WeChat in China? When I arrived in Beijing recently, two of the first three people I connected with asked not for my phone number, but instead for my WeChat ID.
Launched in January 2011, WeChat has quickly risen to become one of the world’s most popular mobile messaging and social networking platforms. In early July, Martin Lau, president of Tencent, the company behind WeChat, revealed that the app has over 400 million registered users and nearly 200 million monthly active users. What’s next for China’s homegrown blockbuster, whose rivals include Silicon Valley’s WhatsApp, Japan’s Line, and Korea’s KakaoTalk? Its future hinges on the answer to two questions:
1) Monetization – can Tencent turns WeChat’s popularity into profits? AND
2) International growth – can WeChat translate its domestic dominance into global success?
What is WeChat?
WeChat (微信 or weixin in Chinese) began as an instant messenger for mobile devices and has developed into a multi-function mobile communications and social networking platform, or what PandoDaily’s Hamish McKenzie refers to as “a social network and uber-communications platform.” My contextChina colleague Lilac Peterson recently offered a close look at all of its different features. Here’s a quick review: Users have a profile with a picture, can post “moments” to their timeline through a feature similar to that offered by Instagram, can connect with their friends through short voice messages (walkie talkie style), video chat (Skype style), or IMs (WhatsApp style). They can search for new friends through various mechanisms, from the random “shake,” which connects you with other users shaking their phone to make new friends, to the integration of your phone contacts with the WeChat platform.
WeChat’s popularity is not due solely to its design, but also to the reputation of its designer, Tencent, which is China’s most valuable Internet firm by market capitalization. Tencent is most famous for creating QQ, an Internet instant messaging platform with nearly 800 million registered users. WeChat’s initial growth was fueled largely by QQ users. Indeed, for the first few months of its existence, a QQ account was the only method by which users could register for a WeChat account. More recently, however, Tencent executives have, in an effort to diversify and internationalize WeChat’s user base, opened up new routes of registration, including Facebook, a Weibo account, or a phone number.
Despite the favorable conditions for growth created by Tencent, WeChat has faced its fair share of challenges, including two behemoths in the Chinese Internet realm: 1) China’s powerful state-owned telecom operators, who were upset that their SMS fees were being eroded by WeChat’s free Internet messaging system; and 2) the wildly popular Sina Weibo, a Chinese social networking platform with over 500 million registered users. How has WeChat fared?
So far, so good. WeChat was able to stave off telecom efforts to lobby regulators to allow them to charge Tencent for its service (Tencent and a few telecoms have now announced new WeChat subscription packages). As for Sina Weibo, Chinese tech site Huxiu recently published the results of a report which indicated that the once vaunted microblogging site’s number of users has fallen to a level not seen since the mid-2011 (incensed by Huxiu’s report, Sina subsequently banned the publication from using Weibo for a week).
What’s next for WeChat? Two new challenges are arguably more daunting than state-owned telecoms and Sina’s Weibo: how to turn the free WeChat’s popularity into a source of profit, and how to succeed outside China in the highly competitive space of mobile messaging apps.
Tencent currently faces a challenge familiar to many companies in the Internet realm (we’re looking at you, Facebook): if you’re not charging for your service, how do you make money? WeChat is free to download, free to use, and free of ads. So how does Tencent plan to turn its popularity into profits? The answer to this question is beginning to come into focus: “freemium” games and an online payment service.
Earlier this month, Tencent unveiled the first of its WeChat games, which are free, but also include special features that users can pay to obtain. They are also reportedly developing an online payment service that will be released with upcoming versions of the app. Both of these moves will generate revenue, though whether they can translate WeChat’s fame into fortune remains to be seen.
As Tencent turns to plans to monetize WeChat, it also continues to engage in a heated competition for global supremacy in the mobile messaging app realm. The company has hired world famous soccer star Lionel Messi as its WeChat spokesman and recently announced that its prized app now has more than 70 million international users. The battle for international dominance in mobile messaging, however, remains very much contested, with WhatsApp from the U.S. and Line from Japan continuing to grow and prosper.
The rap on Chinese Internet companies has long been that their services are so localized that they can’t compete abroad. Baidu, the operator of China’s most popular search engine, famously tried to take its game to Japan, only to flop. Can WeChat reverse this trend and beat out WhatsApp and Line?
With 70 million international users, it’s on its way. Moreover, its appeal cuts across nationalities and socioeconomic classes. Remember those two friends who asked for my WeChat ID when I landed in Beijing? One is an Ivy-league educated American working for a world famous NGO. The other is a middle-school educated Chinese citizen I met back in 2009 while he was selling vegetable kebabs outside my old apartment.
Both of them, though, were in China. Can WeChat replicate this success on our side of the Pacific? That depends – will you use it?
Editor’s Note: contextChina is a Seattle-based media company following the growing impact of China on the Pacific Northwest across business, technology and policy. You can follow contextChina on Twitter @contextchina.