WeChat-Chinese-Messenger

Guest post by Thibaud Andre

 

I recently met with Thomas Graziani, co-founder of marketing & IT agency WalktheChat. I talked with him about the development of WeChat and the payment war with Alibaba and Apple.

 

Andre: Hi Thomas. You co-founded WalktheChat, which focuses on helping companies to use WeChat to promote themselves in China. Why did you choose to do this and what makes WeChat special?

Graziani: There are two things that make WeChat very special and they actually go hand-in-hand. First and foremost, the WeChat business model is outstanding. It’s a service company, and it’s making money from value added services. That’s very unique. Look at Western Internet firms; Facebook, Twitter, and Google mostly focus on one method of making money: advertising. This means that when Facebook wants to make more money, they have to sacrifice the user experience by adding ads on the timeline. For WeChat, it’s the opposite; they want as many people as possible to use their services so that they can provide them with more opportunities to make payments through WeChat. In this way, user experience and the ability to make money are far more well-aligned.

The second difference is their ability to integrate services without overwhelming users. They combine the functions of a Whatsapp, Facebook, and Paypal with some elements from Amazon, and even some types of unique app ecosystems. This means you can do an incredible amount of things without leaving WeChat, and it also provides a lot of opportunities for marketers to get creative by leveraging these links.

A: Do you think that makes WeChat a threat to Alibaba?

G: Definitely. However, it is clear that today most of the cash (and most importantly, the cash of the users, with 80% of the mobile payment market share) is in Alibaba’s hands. But the paradigm is shifting faster and faster toward mobile, and Tencent has a tremendous stronghold there. This doesn’t mean Alibaba is going to get wiped out of the market; they are incredibly strong and adaptive. But they are already starting to give territory to Tencent, and this will happen more and more.

A: What about Apple with Apple Pay in this payment war?

G: I think Apple Pay is as good as dead in China. Apple’s market share in China is tiny, about 7%. They are beaten by pretty much everybody: Xiaomi, Samsung, Huawei, and Lenovo. If a fraction of users start using the iPhone 6, that won’t be enough to convince shops to start investing in the corresponding hardware to support it. While everyone is already using WeChat and Alipay, and with Tencent just releasing its “swipe card” solution to pay at the cashier, it’s clear that Chinese shop owners will quickly support these local solutions instead.

A: So in the end you decided to focus on developing only for WeChat? Why focus simply on this app?

G: WeChat is more than an app. As I said, it integrates a lot of things. It’s an ecosystem. It has its own API, which enables developers to come up with their own “app-like” solutions: you can process orders, use geo-localization, voice recognition, manage your company’s processes, membership cards and discounts, all through WeChat. It’s so versatile that having a specific focus on it enables us to keep up with the latest trends and with the pace of innovation. And that’s a key asset.

A: Sure, but the Chinese social media space has proven to move very quickly. How confident can we be that WeChat will stay?

G: It’s true that things are moving quickly in China, but that doesn’t mean people are simply following trends. If you look at the evolution of social networks in China, it’s very clear what killed or put in trouble WeChat’s predecessors. Renren missed the mobile revolution. Weibo suffered from political backlash and the rise of the “zombie fans.” WeChat has been extremely careful about all these things and meticulous about preserving user experience. This doesn’t mean that it’s 100% safe from harm; maybe tomorrow everyone will start using social networks on smart watches and WeChat will have missed the ship, but for now we can be confident. Also, Tencent proved very successful at keeping QQ and QZone alive and growing through all these years, so they have the experience to suggest they can pull it off.

A: What about WeChat abroad?

G: WeChat already boasts hundreds of millions of users abroad, but this doesn’t mean they are going to penetrate the European and U.S. markets just yet. A lot of the foreign usage of WeChat is coming from first or second generation Chinese emigrants. WeChat’s main focus for expansion is now Asia, South America, and Africa. They invested $500 million USD in a South Korean mobile game firm earlier this year and ran very aggressive campaigns in South Africa (including one that mocked Mark Zuckerberg). Tencent is pragmatic; they know they have to prove they can expand overseas starting with easier markets. Europe and the U.S. will come later, if ever.

There is however a big opportunity in using WeChat to provide a better experience to Chinese tourists visiting abroad. This can be done right now and is the most straightforward use of WeChat outside China.

 

Thibaud Andre is manager at Daxue China Market Research, a China-based market research firm focusing on China. Find him on Twitter as @DaxueConsulting or on LinkedIn and Google+.