Business

WeChat – and Facebook listens

Michael Jones

Tencent is dominating China's business and social platforms, and for good reason.

What goes app: The QQ.com logo on the ­Tencent headquarters (above) in ­Shenzhen. (Bobby Yip/Reuters)

A month ago, Bloom-berg proclaimed the chairperson of Tencent Holding Ltd, Ma Huateng, to be China's richest man, with a wealth of $13-billion based on Tencent's Hong Kong-listed shares, of which he owns 10%.

His family name Ma means horse, so the internet entrepreneur likes to use his English name, Pony, but there was nothing small about being the first Chinese internet company to list on the Hong Kong Stock Exchange.

The Tencent story is gaining traction in the South African media, no doubt because of Koos Bekker's Naspers owning 34% of Tencent.

The South African chief executive, who is about to step down, and is himself now a billionaire, must be fairly content with the fact that, in a decade, Tencent's shares have increased from an initial public offering of HK$3.70 in June 2004 to today's HK$580 (R804) a share.

You do the maths. If you had invested R10 000 10 years ago you would be a millionaire today thanks to Tencent. After one year of trading, with his company shares increasing by 92%, Pony was quoted as saying "you have seen nothing yet".

Tencent was founded in 1998 and its QQ instant messaging (IM) was launched in February 1999.

QQ number
QQ monthly users reached 818-million last year, which is why one of the first questions Chinese people will ask you is: "What is your QQ number?" Almost everyone in China uses QQ IM.

Almost a decade ago, foreigners living in China realised the rule of IM thumb. Chinese people working in local companies only used QQ, Chinese white-collar workers in foreign companies preferred MSN but also had QQ accounts, whereas the foreigners in China preferred Skype but also had MSN accounts.

Today not much has changed, and everyone knows that, if you want to transfer a file at lightning speed, QQ is the most rapid way, leaving players like Skype trailing behind in the dust.

The launch of Facebook in the West in 2004 by unknown student Mark Zuckerberg heralded the dawn of a new internet age.

As it was gaining popularity around the world, including in China, its Middle Kingdom life came to an abrupt end in 2009 during the Urumqi (capital of Xinjiang autonomous region) riots when the government blocked it.

The greatest beneficiary of the blocked Facebook was the local clone RenRen.

Microblogging and Twitter clones
But the dawn of microblogging and a new chapter of Twitter clones saw the decline of Facebook clones, with RenRen being the biggest loser.

For a nation of very busy people who always do things in the quickest possible manner, microblogging was perfectly suited to Chinese society.

Twitter's success in the mainland followed in the same footsteps as Facebook's, however: it was soon blocked.

Tencent Weibo jumped into the 140-characters fray in 2010 and did exceedingly well, gaining more than 500-million registered accounts by last year.

But it remained second favourite to rival Sina Weibo, which, belonging to China's online media giant Sina.com, was simply trendier than Tencent.

Still, leading a nevertheless solid and highly profitable company with more than 50% of its employees being research and development staff, Tencent's Pony Ma was clearly undeterred. Tencent launched Weixin (also known as WeChat) in January 2011.

Growing strongly
Today WeChat has 272-million active users and is growing strongly. There can be absolutely no doubt as to who the main loser is: Sina Weibo.

The private contact nature of WeChat is now becoming the preferred method of communication. Just as QQ IM remains core in the communications fabric of Chinese society, WeChat is now becoming part of Asia's communications and social media fabric and is spreading to the rest of the world.

No doubt a little nervous, Zucker­berg enters the fray with his astounding offer to purchase WhatsApp in a $19-billion deal.

The question on everyone's lips right now is what his plan is and how this will impact on WeChat in particular, and on Tencent in general.

It is fairly obvious that WhatsApp has rearranged its functions to get it closer to WeChat, whereas WeChat got it right from the beginning.

The brilliance of WeChat is its simple and slick design. You can send text, voice messages and emoticons, and share photos and videos with individual contacts or groups.

Phone bills halved
Since using WeChat, my mobile phone bills have halved and, like most Asians who use it, it has come to dominate my personal and business communications. But these functions are where the similarities with WhatsApp end.

Do you use Skype for video or voice calls? WeChat has its own version. Not so keen on sharing your mobile number?

On WeChat, you can add contacts by adding in their WeChat ID or, even quicker, scan each others' QR (quick response) codes. Most people here have personal QR codes printed on their business cards.

The second you grow tired of a contact, at a touch of a button you can delete it and your privacy is protected by not using or sharing your mobile number.

Users can tap into the "people nearby" function to make new friends and perhaps even find romance. Invitations to chat with strangers can be accepted or declined and actual location is not shared, so it is perfectly safe; you are in control.

You can play online games and, lastly, the function "moments" allows you to post photos with accompanying unlimited text, rendering Facebook itself obsolete.

Blocking moments
If there's someone you do not wish to share your more private moments with, you can keep them as a contact but block them from your moments.

Equally, if you think Jane is posting one too many selfies, block her moments to keep your sanity.

All of this makes using Facebook again feel as if you have entered a one-dollar saving shop. After you have downloaded the single WeChat app, you can delete many others.

But the strength of WeChat in China is in its add-on features. Take, for example, WeChat payments. In China, I can book and pay for a taxi, buy movie tickets or group dinner tickets and, in selected malls, I can buy almost anything.

This is the true genius of WeChat — no ads and no nonsense, only real value to improve the quality of my life.


Hard-pressed South Africans open to cheap talk

South Africa, where 80% of the adult population own a cellphone but the median income is a mere R3 000 a month, poses specific challenges to tech companies trying to make inroads into the cellphone market.

For many, the solution has come in the form of apps that allow users to chat at rates cheaper than those offered by local service providers.

Although cellphone-based instant messaging services such as MXit previously dominated the South African scene, they have made way for more sophisticated communication platforms with selected contacts.

One such newcomer is WeChat, which is currently being punted hard on the local market: if you don't have the app, you may recognise the name from billboards and TV adverts.

It's a free "over the top" (OTT) application that was introduced in 2012. It allows users to send written text messages, videos and photos using internet connectivity at a fraction of the price charged by regular SMS.

It has a captive market in China and is growing exponentially in countries such as the Philippines and Malaysia.

World's fastest-growing social app
It claims to be the world's fastest-growing social app and has more than 100-million registered accounts.

A recent survey by GlobalWebIndex estimated that its audience grew by a record 379% between the second and fourth quarters last year.

WeChat is owned by Chinese Tencent, which in turn is 34% owned by Koos Bekker's local media dynasty Naspers. So its interest in the South African market makes sense.

But the Chinese app is entering a market already dominated by some stiff American competition: WhatsApp. It's believed that more than half of all adult South Africans living in towns and cities have downloaded WhatsApp, the world's most popular OTT app, but it recorded a revenue of only $20-million last year and has a mere 55 employees.

Facebook, which recently took over the company, essentially paid R460 for every one of WhatsApp's 450-million users to make up the hefty R207.74-billion bill.

But WhatsApp's founder, Jan Koum, has insisted on a very particular revenue model, and that strictly excludes making cash through advertising.

Revenue from subscription fees
WhatsApp has made all its revenue from subscription fees. People use the app for the first year free of charge; thereafter, they are (in theory) billed $0.99 annually, although thousands of users say they have used it for several years and never paid a cent.

But Koum is optimistic it will be worth its weight in subscription fees alone, with one million new users signing up every month.

On the other side of the coin, WeChat hopes to carve out its marketshare in price-sensitive South Africa by keeping its app free.

It makes its money through add-ons and innovative sales structures. According to the Economist, about 85% of the money Tencent will make from the app this year will come from selling games. It also sells stickers, gaming avatars and add-on services.

In its home market, even some vending machines now sport a WeChat-compatible barcode for each item. Users can scan and pay for a packet of chips simply by opening WeChat, or Weixin, as it is known in China.

But the question is how well these functions will translate into the South African environment, and what the appetite of the cash-strapped South African consumer will be for the add-ons?

Sharing numbers
"Currently we do not share individual territory numbers, but we are pleased with the progress we have made [in South Africa]," said Brett Loubser, managing director of WeChat Africa.

Many of the standard functions found on the app overseas are available locally.

Its "brand-owned" channels, known as "official accounts" are also available on South African soil, he said.

"In 2014, we are working hard to deliver platform services in South Africa to further strengthen our differentiated position," he said.

"Our first successful step in this regard has been delivering a highly active second screen experience for Big Brother Mzansi together with DStv. We built a message to screen, voting and polling environment for the show in a matter of weeks."

Whether innovations like these will help to conquer the already entrenched subscription-based model remains to be seen.

But the "over the top" battle is likely to yield cheaper prices and more inventive offerings for the Mzansi consumer. — Thalia Holmes

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