WeChat: How a Chinese Messaging App is Winning the Internet

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. Where will it grow next?


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? It’s one that many users in the West have never heard of – but should understand: WeChat, a Chinese instant messaging app.

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. 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.

How has WeChat achieved such impact, and where will it go next?

Messaging as a Platform: The Power of Network Effects

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

Scale: WeChat’s massive scale (63% of internet users in China) not only makes the app attractive to users (all  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’s reservation platform if it means they can access WeChat’s 600 million active users.

First-mover advantage: WeChat’s 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’s services, WeChat can increase user lock-in and add real value to users’ lives. For example, WeChat can now offer customers loans of up to $30,000 instantaneously and without a traditional credit check – giving people access to capital they otherwise may not have.

The Next Phase: Growing Pains?

In WeChat’s 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.

However, not all is rosy for the internet giant. Despite WeChat’s 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 – it is the #3 chat app in India after WhatsApp and Facebook Messenger, and #2 in the Philippines (after Messenger)3. 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’s advantage in China, they make penetrating new markets extremely difficult.

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’s monetization prowess; however, Messenger’s global reach and Snapchat’s 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’s 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?



2Samsung Global Innovation Center




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Student comments on WeChat: How a Chinese Messaging App is Winning the Internet

  1. Great summary of the insanity that WeChat is – although it potentially underestimates the role WeChat plays in the Chinese society. Just as most companies in the Western World have their page on Facebook, virtually ALL players in China kick off their digital strategy with a WeChat plug in. About half of the apps that consumers in the Western World have on their phones as separate icons (the ones you outline but also mobile banking, Venmo, Hinge, stock tracking, Yelp etc) are integrated into WeChat. The benefits of such integration are quite clear and likely if you were to design a perfect one-stop-shop app to have it all from scratch, WeChat would come close (and that’s why it has taken China by storm). However, to your latter point on WeChat’s troubles with winning in other markets, consumers are creatures of habit. And adopting WeChat in its full glory would take not only giving up your favorite messenger but replacing the other 20+ apps you frequently use, which altogether means A LOT of change to your consumption habits.

  2. Great summary highlighting the point that the Western society should start noticing the movements of WeChat in order to connect with the Chinese consumer. Many of the obstacles you mention about WeChat are definitely real. The fact that they are facing growth obstacles outside China is not only a limitation on their end, but combined with the internet security and technology infrastructures unique to China, the Chinese consumer is becoming more and more cut off from the West. I think this is a threat to WeChat, but also an incredible opportunity. During the summer I was working in a growth stage tech start-up in the U.S. as they just start to expand their client base overseas to China. While setting up a product demo meeting with the Chinese client, we are trying to connect with the client with very basic business functions such as an internet call and share the demo screen for the client to see. However, as we found out, neither GChat, Logmein, or Skype works smoothly in this setting and traditionally the sales team has just been using basic phone lines to hold overseas conferences with these Chinese clients which often turns out sounding fuzzy and unclear. Ultimately the only solutions to this problem was to build a communication server that explicitly addresses this in house (like big consulting firms who have these capabilities) or to use WeChat. We ended up successfully achieving our goals through setting up our conference calls on WeChat. I think this is a largely neglected area of opportunity for WeChat to overcome some growth obstacles, by focusing on the connectivity of the rest of the world to the Chinese community.

  3. 真的吗?

  4. I agree with your point that WeChat is having difficulties expanding abroad. With a huge customer base in their home market, they are perhaps channeling more resources into the domestic market by offering various types of services on their platform that will touch many parts of the consumers’ lives. An interesting analysis would be to compare them to LINE, which is Japanese-based and has successfully expanded to international markets such as Indonesia and Brazil. These demographics are very attractive and represent a huge opportunity going forward. One way LINE has been able to do this is by localization of the product and truly connecting with local consumers in these international markets.

  5. WeChat is a wonderful tool of communication in China, and its popularity among Chinese users is obviously undeniable. Although, the collusion between Chinese social media companies and the Chinese authorities can’t be ignored, and is a key driver to WeChat’s success. The Chinese social media market is heavily regulated by the Chinese State and considered as a protected market in the Catalogue of investments, preventing international social media companies to step foot in the Chinese market. Instead, Chinese social media companies flourish in the domestic market (WeChat, Weibo, QQ, etc…) in total collusion with the Chinese administration. The sophistication and easy-to-use technology of WeChat is undeniable, but one needs to acknowledge that its tremendous success in the country with the largest number of Internet users in the world also stems from other reasons.

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