Goodbye Messenger, Hello WeChat
James Wen, Dartmouth Business Journal
Since the smartphone first came out on the market, people have been filling their screens with dozens of new apps. On many phones, you can find Uber, Facebook and perhaps a few apps from banks and popular stores. WeChat, a messaging app created by Chinese company Tencent, combines all of them into one and is taking advantage of the growing mobile e-commerce market to move beyond providing simple messaging services. Released in just 2011, WeChat has grown to have over 806 million users and makes its counterparts, Facebook’s Messenger and WhatsApp look primitive in comparison.
WeChat sets itself apart by combining and innovating features of many other social media and e-commerce apps. Besides simple messaging, WeChat also allows users to video chat and call their contacts. Users can also post photos and status updates in the “Moments” section much similar to Facebook’s Newsfeed. Their contacts can then tag, comment or like each others posts. WeChat has also brilliantly streamlined the process of connecting to new people. Users simply scan personalized QR codes to connect with new contacts. At large functions, such as a parties or networking events, users can quickly connect with each other by using the “shake” or “radar” features that connect individuals to others in their immediate vicinity.
WeChat’s foray into e-commerce is what truly set them apart. In 2013, WeChat launched WeChat Wallet, an internal app feature that at first allowed users to send money to each other, similar to PayPal’s Venmo. Many Chinese users especially took advantage of the new feature during the holiday season. According to the Wall Street Journal, in 2016 Chinese users sent 32 billion “bundles” of cash during New Years alone. About a year after the start of WeChat Wallet, Tencent partnered with Didi, a taxi hailing app. WeChat users were then able to call and pay for a taxi all within the app. In its first month, over 21 million cab rides were ordered via WeChat according to TechInAsia. This service largely helped Didi push Uber out of the Chinese market.
Tencent’s partnership with Didi was WeChat’s first major advance in e-commerce. Shortly after, WeChat launched in-store payments. Tencent took advantage of the WeChat Wallet platform and QR codes already in the app to make in-store payments more seamless. Users would first link their credit cards with WeChat Wallet then have their QR code scanned when making a purchase at a store. According to the Financial Times, WeChat handled 21 percent of Chinese mobile payments in 2015, just a year after starting the service.
WeChat also allowed businesses to make their own accounts, similar to Pages on Facebook. As a result, consumers can browse, research and make purchases all within the app. According to Tencent, over 300,000 retail stores connect with customers on WeChat. Like eBay and Amazon, individuals can start accounts to sell their own products. Businesses like McDonalds and Starbucks use their WeChat pages to allow customers to find the nearest store and order products for pickup. Other companies such as Coca-Cola took more creative measures to increase direct customer interaction. WeChat users can play games in the app and then receive Coca-Cola coupons, which then go to their “wallet” for later use.
WeChat’s diverse range of features affords it a unique advantage: one-stop shopping. Unlike other apps such as Uber or Amazon that offer a narrow focus of features, WeChat allows users to carry out many activities in one place, making mobile phone use more user-friendly. The app’s efficiency has allowed it to grow to its current size in just half a decade while also bringing in high revenues for Tencent. According to the BBC, WeChat’s growth helped Tencent overtake the better-known Alibaba as China’s most valuable tech company in August 2016. Tencent was valued at $249 billion, $3 billion more than Alibaba.
Another advantage of WeChat’s “one-stop-shopping” characteristic is that it can holistically look at users’ habits, unlike other apps that can only collect users’ habits in specific areas. This means that Tencent has the data to potentially analyze consumer markets more efficiently than other companies. The data collected from WeChat itself could also be a significant profit maker for Tencent.
With a strong user base in China, WeChat has turned its attention to foreign markets, most notably in South Africa and South Korea. In many foreign countries, more people use phones than computers. Therefore, the future of e-commerce will depend on mobile e-commerce growth. According to Gartner, a technology researching company, consumers will spend $2 billion on online shopping through their mobile devices by the end of 2016. Social media and messaging apps, especially Facebook’s Messenger, are losing out on what could potentially be billions of dollars in revenue. According to Forbes, in the first quarter of 2016, WeChat brought in $1.8 billion in mobile revenue. In contrast, Facebook’s Messenger brought in zero. WeChat’s potential to become a major player in overseas markets will increase as mobile e-commerce grows, despite the company’s moderate success abroad. Apps like Messenger need to innovate and go beyond simple messaging — otherwise many more people will be scanning each other’s QR codes than friending each other.