{"id":793,"date":"2015-09-14T16:45:58","date_gmt":"2015-09-14T20:45:58","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/wechat-how-a-chinese-messaging-app-is-winning-the-internet\/"},"modified":"2015-09-14T16:45:58","modified_gmt":"2015-09-14T20:45:58","slug":"wechat-how-a-chinese-messaging-app-is-winning-the-internet","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/wechat-how-a-chinese-messaging-app-is-winning-the-internet\/","title":{"rendered":"WeChat: How a Chinese Messaging App is Winning the Internet"},"content":{"rendered":"

\"\"\"\"<\/p>\n

 <\/p>\n

What app has over 600 million monthly active users, drives $15.3B in mobile data consumption and contributed $1.76B to lifestyle spending last year1<\/sup>? It\u2019s one that many users in the West have never heard of \u2013 but should understand: WeChat, a Chinese instant messaging app.<\/p>\n

Owned by Tencent Holdings, WeChat has evolved from a simple social media application used to chat and share photos into a behemoth of a platform offering everything from peer-to-peer payments, taxi hailing, movie tickets, airline tickets, and most recently, no hassle loans<\/a>. It has pioneered the messaging-as-a-platform business model, monetizing its user base in ways that WhatsApp has neglected and Facebook Messenger and Snapchat are just beginning to develop.<\/p>\n

How has WeChat achieved such impact, and where will it go next?<\/p>\n

Messaging as a Platform: The Power of Network Effects<\/u><\/strong><\/p>\n

Engagement:<\/strong> Messaging applications, and WeChat in particular, demonstrate high user retention and engagement compared to other apps \u2013 they are used more frequently (8.9x per day vs. 1.9x for the average app2<\/sup>), more deeply (WeChat users spent 209 minutes per month in the app on Android1<\/sup>), and over a longer period of time (messaging apps retain 62% of users after 12 months, vs. just 11% for the average app2<\/sup>). This level of engagement (aka \u201ceyeballs\u201d) gives WeChat the ability to offer additional (monetized) services to its users.<\/p>\n

Scale:<\/strong> WeChat\u2019s massive scale (63% of internet users in China) not only makes the app attractive to users (all<\/em>\u00a0 my friends and colleagues in China used it daily), it attracts platform partners as well. Brands want to create official accounts to interact with their customers, and restaurants want to integrate into WeChat\u2019s reservation platform if it means they can access WeChat\u2019s 600 million active users.<\/p>\n

First-mover advantage:<\/strong> WeChat\u2019s huge growth was driven in large part by the massive growth in smartphone adoption in China. As users are coming online for the first time, they are not tied to online services like banks, shopping, and music. By pushing these new users to its own or its partner\u2019s services, WeChat can increase user lock-in and add real value to users\u2019 lives. For example, WeChat can now offer customers loans of up to $30,000 instantaneously and without a traditional credit check \u2013 giving people access to capital they otherwise may not have.<\/p>\n

The Next Phase: Growing Pains?<\/u><\/strong><\/p>\n

In WeChat\u2019s quest to become the portal for the internet, it is capturing value across industries from banking to gaming to transportation, and disrupting the traditional players in the process.<\/p>\n

However, not all is rosy for the internet giant. Despite WeChat\u2019s success in China, it has had trouble growing abroad. It has invested hundreds of millions of dollars in marketing overseas, primarily in emerging markets such as Latin America, Southeast Asia and Africa. And WeChat has achieved some success \u2013 it is the #3 chat app in India after WhatsApp and Facebook Messenger, and #2 in the Philippines (after Messenger)3<\/sup>. However, WeChat has struggled to grow in potentially lucrative markets such as the U.S., where low SMS costs means texting, rather than over-the-top chat apps, is still widely used, and it is losing to some homegrown foreign apps such as Zalo in Vietnam. While network effects work to WeChat\u2019s advantage in China, they make penetrating new markets extremely difficult.<\/p>\n

Meanwhile, Facebook recently announced its AI-based personal assistant M will live in Messenger, and Snapchat is pioneering innovative video-based interactions between brands and consumers. These social media companies still have a long way to go before reaching WeChat\u2019s monetization prowess; however, Messenger\u2019s global reach and Snapchat\u2019s young teen user base are areas WeChat has not been able to penetrate thus far. These social media apps do not pose a threat to WeChat\u2019s home user base (Facebook is blocked in China), but what will WeChat do as the Chinese economy slows down? Tencent can keep going deeper in the Chinese market, adding more services for its existing users, but will this be enough?<\/p>\n

 <\/p>\n

1<\/sup>Technode<\/a><\/p>\n

2<\/sup>Samsung Global Innovation Center<\/p>\n

3<\/sup>GlobalWebIndex<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

WeChat has pioneered the messaging-as-a-platform business model, generating massive revenue from its 600 million active users and capturing value across industries from banking to transportation. 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