WeChat 101- Quit Comparing WeChat and WhatsApp

WhatsApp, Viber, Telegram and Snapchat are not like WeChat, LINE and KakaoTalk.

I’ve written about LINE and KakaoTalk but now it’s time to intro the last player – WeChat. WeChat is not – I repeat NOT anything like WhatsApp or Viber.

Aside from multi-media communication capabilities: photos, video, walkie-talkie and broadcast features, in August of 2013, WeChat completely overhauled their product with v5.1 to add a bunch of new features and functions.

They keep differentiating themselves from the rest of the chat apps and this is why:

  • in-app payments
  • P2P (peer to peer) and O2O (offline-online) core strategy aside from games <– HUGE
  • multiple monetization streams

Payments

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WeChat Payments connects bank card to WeChat account so users can make payments in-app.
Users can make transactions happen through 1. payments to WeChat authorized partner retailers 2. P2P (peer to peer) or in plain English other WeChat users – example: users can send one person a specified amount, or send money to a group and divide the lump sum among a group of friends.  If I had a penny for every time I’ve had issues with group payments where one person pays too much, too little I’d have about four extra iPhones sitting around. Or think about that one person who never has cash, etc., etc. WeChat group payments is the perfect resolution for group events / activities.

O2O / P2P Commerce

WeChat also partnered with sites and services – whether through acquisitions or buying a stake in the company – doing flash sales or becoming the preferred payment partner. To date, DianPing – China’s answer to Yelp, with a Groupon type group buying feature DianPing also offers coupons and discounts and users can even order food for delivery – is one of the most notable.

The other is Didi Dache – China’s Uber – where users can order a taxi and make payments, all in-app. Since forming the partnership in Jan., WeChat reports

  • 21mm cab rides have been booked via WeChat
  • 700k daily bookings via WeChat
  • Didi Dache and WeChat also pay cab drivers bonuses when the drivers use their services vs a competitor

WeChat also aggressively positions themselves as the entry point for global brands who want to reach China’s youths. Most recently, Vivienne Tam and WeChat collaborated to bring NYFW (NY Fashion Week) to WeChat users.

They’ve also done campaigns with Mc Donald’s, Starbucks, Burberry, Pepsi and Maybelline – bottom line, they are making money becoming a payment solution and by advertising as well.

Another monetization channel through partnerships is content. WeChat and Chinese media outlets bring news and entertainment to users. However, instead of solely bringing content into the app like Flipboard or Facebook’s Paper, they have their media partners build proprietary micro-sites into WeChat with proprietary URLs ie: mp.weixin.qq/majorchinesenetwork and charge users subscription fees.

They’ve also ventured into streaming video, launching a standalone TV with CNTV (major Chinese tv network).

If you think that’s all, they are also China’s small business e/m-commerce solution (like Etsy or even Amazon).
Small business accounts are

  • free to create — fee is dependent on level of API customization and how much a business wants to integrate their products and services into WeChat
  • transactions are conducted inside WeChat — which leads to increased time spent inside app
  • bar-code scanner capabilities so people can scan a bar code in a store of something they see and shop for it online for example
  • built in loyalty cards and point card systems

Major brands and retailers to even a college student with a fruit stand can buy and sell on WeChat – that’s how simple it is.

WeChat states they have 300mm active users per month and YoY growth of 124% (note: these numbers are before the Red Envelope campaign that reportedly activated 20mm transactions within 9 days and announcement of all their partnerships).

WeChat is not fucking around.

I’m sure there are so many more features and functions, products and services I may be missing. This is information I gathered through English sources (FT, Economist, WSJ, Techcrunch, The Next Web, Tech in Asia and some random Chinese sites I ran through Google Translate) but even if I don’t know all the details, it’s pretty clear they are one step above the rest of the chat app herd.

One can argue their success is due to the uniqueness of the Chinese market and how the economy is intertwined by a select few and with the government, but strip away all that noise and look at WeChat as a product. They are still several steps ahead of the rest — even LINE, that I am a massive fan of.

2014 is going to be a year to closely watch Asia.

Scale of Chat Apps in Asia

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I don’t think America still understands how big chat apps are in Asia and that’s ok. Like I keep saying, the US is email, iPhone (iMessage), SMS and Facebook Messenger reliant.

In Asia, it costs money to SMS. It costs money to make phone calls. Not as much as Europe maybe, but it still adds up. The US may be the only country where SMS and voice are flat fee, unlimited.

Because we are charged by telecos, chat apps have become a solution to avoid fees for something basic and ubiquitous as communication.

In Asia we are so chat app reliant, my personal and even work emails have been reduced by at least 85%. The only people who actually email are my American friends and colleagues.

Because I stopped relying on email as my main form of communication, I now see what a massive burden email is and how much of my time email dictated.

Chat apps don’t restrict texts with character counts, but because of the context of the core products (real-time interactions, short mail, instant messaging like features and functions), it cuts out a lot of unnecessary bullshit and people just get straight down to the point.

Granted, this is only from my experience and doing business with the Japanese, but I much prefer interacting with colleagues on LINE or company approved Viber as we communicate more efficiently. (Quick contextual background: the Japanese language has four different ways of speech, two honorifics. The honorifics require buffer language — a lot of set phrases before getting to the point. Chat apps tend to cut all that out.)

Aside from the communication utility, chat apps in Asia are evolving from tools to full fledged platforms. I keep repeating this but it’s almost necessary, as there are people still comparing WhatsApp, Viber, Telegram and Snapchat to LINE, WeChat and KakaoTalk. WhatsApp, Viber, Telegram and Snapchat are used for communication only. With LINE, WeChat and KakaoTalk  usres can text, call, video chat, edit photos, play games, get coupons/discounts… and now WeChat allows their users to shop. In their app. Asian chat apps are more than chat apps, they are turning into ecosystems.

The Asia chat app market is truly something else but I think one has to live in China, Korea or Japan to experience the phenomenon for themselves. At least for me that was the case. In a mere six months chat apps have completely changed the way I communicate and also purchase via mobile.

God, I love technology and I love being in Asia seeing, breathing and living the evolving products and market.

KakaoTalk’s Challenges

While the US is still trying to figure out how to jump on the messaging app money train, the downfall of messaging apps has begun in Asia.

KakaoTalk is Korea’s most dominant messaging app and an interesting analysis was just released [source].
A few takeaways:

  • KakaoTalk has 130 million subscribers. 35 million of them are from Korea.
  • Korea has approximately 37 million smartphone users
  • Kakao Japan was set up in July 2011. They have a joint venture with Yahoo Japan
  • Kakao is also in Vietnam and Indonesia
  • 9 of their games have at least 100 million cumulative downloads
  • since July of 2013, they have not hit 100 million
  • new subscriber acquisition rate is slowing down
  • they are also losing ground in overseas markets

KakaoTalk’s monetization strategy is lacking and heavy reliance on mobile gaming is a bad idea. Just look at Gree, the Japanese mobile gaming company. Their net profit Q1 fell 74% from the previous year and it keeps declining [source]. Even if KakaoTalk boasts game revenues of $300 million in the first half of the year [source], KakaoTalk’s user acquisition rate is declining. Their games are no longer as popular. They will see a shortage in projected revenue unless they come up with a new plan.

Their localization strategy is a failure. A joint venture with Yahoo! Japan should have catapulted them to mass penetration quickly, for in Japan, Yahoo!  is still the most visited website source. But they are still very much behind LINE, that entered the Japanese market 15 months after KakaoTalk. I also wonder how KakaoTalk is approaching growth in Vietnam and Indonesia.

KakaoTalk will stay dominant in S. Korea, since they have the most users in their home base, but LINE is also owned by Naver. Naver is a S. Korean company and they also have home base advantage. Unless KakaoTalk figures out a way to scale the servers (they are experiencing server errors and outages. Five that I could find, to date. 1,2 ), users can quickly move to another service as fast as they onboarded. Especially, since messaging apps are the way we communicate in Asia. An outage on KakaoTalk or LINE  in the US, is like Gmail or iMessage going down.

The messaging app space is peaking and it’s so competitive right now. It’ll be interesting to keep a close watch on KakaoTalk to see how they will evolve their product and strategies to stay a major player.