WeChat Takeover: China’s All-in-One App That’s Leading the Pack

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11:59 PM HKT, Fri July 7, 2017 3 mins read

Walk outside during rush hour in a big city and you see cars, lots and lots of cars. Now imagine these cars as different apps on your phone, all used to perform daily tasks: one for paying bills, one for buying movie tickets, one for chatting with friends… and the list goes on. But why use 10 cars when you can use one to fulfill all your needs? While the US app system is not far from the former depiction, Tencent’s WeChat messaging app in China has included so many features that it is truly providing its users an all-in-one experience.

WeChat launched in January 2011 mainly as a messenger app. Since then, the platform has blossomed, reporting revenues of $1.8 billion in the first quarter of 2016. In contrast, WhatsApp reported $49 million, and Facebook messenger reported $0 in the same time period. As of May 2017, WeChat has reported a total of 938 million active monthly users.

Experts and government officials have often treated China’s lack of democratic freedoms as a sort of determinism for a future without tech innovation in the country. The growth and rise of WeChat alone contradicts that vision. Not only has WeChat burgeoned rapidly since its launch, US companies have rushed to learn from the app’s success.

WeChat’s market rise through convenient payment methods

As China is the country with the most smartphones made and used globally, WeChat entered a market already being primed for its arrival. Currently, Chinese individuals have largely skipped personal computers, opting to access the internet largely through their phones. Today in China, over half of internet sales are made through phones, as opposed to roughly one third of internet purchases made by phone in the US. The messaging service has also helped to boost its parent company internationally; Tencent appeared as number eight in Brandz 2017 rankings of the world’s most valuable companies.

WeChat has experienced different stages of growth, with each stage revealing brilliant marketing techniques. One of those stages was the introduction of red envelopes. During Chinese holidays, older people customarily gift physical red envelopes filled with various amounts of money to younger family members or the children of close family friends. On the eve of the Spring Festival in 2014, WeChat partnered with CCTV to debut electronic red envelopes that would allow users to send traditional holiday cash packets through their phones. Tencent invited viewers of the Spring Festival CCTV television marathon to shake their phones and receive a random amount of money in a red envelope through WeChat.

The debut of red packets led to an increase from 30 million WeChat users to 100 million users in one month. That figure later ballooned to 3.2 billion users after one year. Also, for those who did not have WeChat Wallet before the shake-a-thon, receiving and opening a red packet automatically created a WeChat Wallet in the app for that user. The Wallet made services like purchasing movie tickets, paying household bills, and taxi hailing services available through the app. This led to a massive increase in users who linked their bank accounts to WeChat and started making payments through the app. This past Spring Festival celebration, more than 420 million users sent a total of 32 billion red envelopes, ten times the number sent in 2015.

Oddly enough, Alibaba actually introduced the concept of digital red envelopes in 2012, but the company was more limited in its approach, only allowing individuals to pay other individuals rather than making payments in groups. The feature did not take off at the time. However, since WeChat’s red packets took off in 2014, Alipay, Baidu, Weibo, and other Chinese companies have started to copy the messaging app’s payment services.

WeChat has integrated payment and red packets with its group messaging experience. Unlike other apps, WeChat allows its users to make payments or send red packets to groups of people, thus increasing the likelihood that users will create groups and interact to a greater degree. As a WeChat user with family in China, I can personally attest to the rush that accompanies opening and sending WeChat red packets. Our family shared an estimated RMB 200 at least in our own family group this past Spring Festival celebration. Sending red packets was its own regular activity each night of celebration. When I wasn’t sending or receiving red packets, I was watching other extended family send and open red packets to their own private family groups.

US copycats and the difficulties of an all-in-one app in the US

Facebook has taken note of WeChat’s successes, and is attempting to implement some of WeChat’s strategies in a US market through Facebook Messenger. Facebook Messenger now allows users to make payments between two individuals, location share, and purchase flowers and limited retail items. Despite the increase in payment functionalities, Facebook has stuck to advertisements as a model for revenue. WeChat largely uses fees associated with payment transaction fees to garner profits from its payment functions. Facebook’s attempts at internal commerce, as well as the attempts of other social media platforms in the US, have largely fallen flat.

The heavily guarded nature of information on customer habits in the US will likely also act as a barrier to the growth of any all-in-one app. Unlike WeChat, which has access to vast amounts of information on its users due to the app’s essential monopoly on messaging and payments in China, US retailers provide customers memberships and rewards specific to their company, allowing these individuals to set up payment methods specific to that store. Tailored membership programs contribute to keeping payments methods diverse in the US market. US retailers and credit card companies hold tight to the information gained from customer transactions. The lack of information sharing (or information monopolization) in the US creates a barrier to creating an all-in-one app for anything, let alone payments.

Once an underdog in the tech industry, China is now nearly leading the pack. Though previously thought of as the world’s tech copycat, China’s innovation has proven strong in the past few years, leaving US companies as copycats themselves. So rather than count them out for their political landscape, the US finds itself watching and learning from the country for future tech innovations.

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