The room was sombre as Pony Ma, Tencent chairman, addressed the assembled group of engineers. It was sometime in 2010, according to the recollection of people who were there, and he was talking about Tencent’s latest bet on social media. The company was losing the microblogging wars. Its flagship product, a platform called Tencent Weibo, which was intended to mimic Twitter, was losing ground to competitor Sina and its highly successful Sina Weibo.
But Ma was strangely optimistic. He said Tencent had a new product, which he did not name, that would be a “game changer” — a chat service for smartphone users that was designed to track the Chinese boom in smartphones.
Five years later, WeChat, the product that was a glint in Ma’s eye at the time, has surged to become practically synonymous with the smartphone in China, with 650m monthly active users. Overall, China has 668m internet users, 88 per cent of whom use 3G or 4G phones to go online.
WeChat’s measure is not just its user statistics, but its ubiquity in Chinese social life and commerce. Meet a new acquaintance in China and you will likely as not be asked to scan your WeChat QR code. Buy a roasted sweet potato on the street and you will probably be able to pay with WeChat’s wallet, used by a vast number of small sellers. WeChat rather than email is the way people increasingly connect.
Mark Natkin, managing director at Marbridge Consulting, which focuses on east Asia telecoms and IT, says the app hit China’s public at just the right moment: “It seemed fresh and very well designed. All the functions you use on a daily basis are there, but none of the clutter. It is versatile without being complicated.”
Zhang Xiaolong, creator of WeChat, said in an online lecture in January that Tencent’s priority with the app was protecting the simple smoothness and seeing off pressure to add functions or features.
“The greatest challenge for Weixin [the Chinese name for WeChat] is not how much more we can do, but how many things we can screen and block. Weixin has been cautiously protecting your user experience. You won’t receive a bunch of system messages.”
The smoothness is no easy feat. While its closest competitor, Facebook’s WhatsApp, strives to be a pure messaging app, WeChat is an all-in-one Swiss army knife of the smartphone era. It can send cash to a friend in a digital form of the “red envelope” — the traditional way to present a gift in China — hail a taxi, deliver a pizza or book a doctor’s appointment.
A report by venture capital firm Andreessen Horowitz says: “WeChat is actually more a portal, a platform, and even a mobile operating system depending on how you look at it.” Its open platform allows programmers to embed official accounts — something akin to individual apps — for hospitals, football clubs and even local restaurants, millions of mini apps in all. This has meant WeChat “is more like a browser for mobile websites, or arguably, a mobile operating system complete with its own proprietary app store”, Andreessen Horowitz adds.
Jerry Wang, founder of TechTemple, a Beijing based start-up incubator, notes that many of his clients develop apps for WeChat as a way to test them before they become fully fledged. Because the HTML web programming language is simple, he says, “you need five or six engineers to make iOS or Android apps but just two to make WeChat apps.”
The arrival of the mobile internet in China happened faster than most people expected. Tencent competitors such as Alibaba and Baidu have had to innovate furiously to keep smartphone users interested in their PC-era offerings and both have seen share prices hit during their efforts to adapt. Tencent is the only leading Chinese internet company whose share price is worth more, by some 3 per cent, than it was a year ago.
Many analysts and executives at the company credit WeChat for this. “Tencent’s days would be over,” were it not for the app, Ma said at an entrepreneur’s club salon gathering in 2013. “Frankly speaking, if this product were to have been developed by some other company, and not us, we would have no way to weather the competition.” (No Tencent employees agreed to be interviewed for this article.)
Created in 1998, Tencent makes most of its money from computer gaming, but attracts internet user traffic mainly with social media, including WeChat and QQ, an older chat software aimed at PC users. A relentlessly hierarchical, engineer-driven company which nurtures fierce competition among employees, Tencent set three teams competing to develop WeChat. Zhang Xiaolong led the Guangzhou-based team that won.
Analysts attribute WeChat’s fast adoption by the public not only to the addictive ease with which it can be used, but also to Tencent’s commanding lead in PC-based social media — QQ users outranked all other services — at the time of launch. When WeChat began, Tencent funnelled QQ users directly to it. Other mobile messaging apps had to “start from a user base of zero”, notes Zong Ning, a Beijing-based technology blogger.
Meanwhile, the government launched a crackdown on Weibo, the microblog site, in 2013, accusing many users of “rumour mongering” and being critical of the Communist Party. The upshot was that suddenly WeChat seemed like the safer, less politically risky alternative and users shifted to it as it offered more privacy in social messaging.
Tencent’s real goal is not just to facilitate chatting, but also to make WeChat a gateway into China’s booming service economy, where everything from food delivery to manicures and car washes are sold online. Smartphones have become the entry point to what is known in China as “O2O”, or online-to-offline sellers.
Chi Tsang, HSBC’s head of internet research for Asia, estimates in a report published in November that O2O is an addressable market of Rmb10tn ($1.5tn), of which only 4 per cent is currently online. “Owning a gateway is more valuable than owning the content which goes through it,” a senior Tencent executive reportedly said.
One WeChat customer is Wang Yanchun, a Beijing woman who sells jianbing, a crêpe-like breakfast pancake, from a kiosk every morning to students. A year ago her son advised her to accept WeChat’s wallet function and take online payments. “It’s more for convenience,” she says. “You do not need to hunt for change and students all use WeChat wallet. They can order in advance and I have their jianbing ready when they arrive.”
On a larger scale, Tencent has sought to build around WeChat with stakes in such ventures as Didi Kuaidi, the car hailing app which is the local rival to San Fransisco-based Uber, food deliverer Ele.me and group deals platform Dianping.
Other companies have tried to imitate WeChat’s success — Alibaba’s chairman, Jack Ma, declared war on Tencent in 2013 encouraging Alibaba’s employees to form a “South Pole Marching Army” and “kill Penguins”. The penguin is Tencent’s mascot. Alibaba was trying, unsuccessfully it turns out, to challenge WeChat with its own Laiwang messenger.
Just as WeChat is claiming victory, some analysts say it must be watchful of another threat, as it looks to monetise WeChat with advertising. Earlier this month, the company was planning to introduce a 0.1 per cent service charge on transferring funds from WeChat accounts to bank accounts, which will encourage merchants to keep funds in WeChat’s own digital wallet.
Zhang Yi, of iMedia, says that despite its war against clutter, WeChat runs the same risk as rival Weibo of becoming too commercialised and deluging users with advertising and information. “When I open my WeChat app, I’m flooded with messages. I never get to read all of them”, he says. “WeChat’s future depends on how well it deals with the explosion of information on the app. If it doesn’t do anything, in about a year, we may see that WeChat hit its peak right around now.”
Additional reporting by Ma Fangjing
Get alerts on Entrepreneurship when a new story is published