Tencent’s Wechat: The end of small apps?
Summary
Wechat, the Chinese version of Facebook develop “In-Wechat-Apps” that combine the third party Apps into the one platform that the consumers can use all functions in Wechat App without downloading the native 3rd-party App.
How many Apps are there on your mobile phone? What do you think of an App that can combine Facebook, Whatsapp, Uber, Paypal, Instagram, Yelp, Expedia, Techcrunch and hundreds of small apps together?
In-Wechat-Apps: 50 functions in 1 App?
We use fewer and fewer Apps in smartphone now. According to eMarketer, 46% of respondents using one to five apps per week, whereas only 35% use six to 10. And the monthly number of new Apps that are downloaded by the consumers are around 1.2-1.6. Wechat, an App created by Tencent with ~800m MAU (Monthly Active Users) was originally a social networking App like Facebook: The Wechat moment is a similar feature like Facebook feed and the messenger service is akin to Facebook Messengers. However, it is now transforming the Application market in China by launching “In-Wechat Apps (IWA)”. IWA is Wechat-based download-free apps that provide a suite of modules for developers to create web apps that run within Wechat and can provide largely the same functionalities as native apps. IWA doesn’t require installations and thus make the App experience more convenient for the consumers. It also creates opportunities for smaller App developers by decreasing the marketing expense and efforts for people to download and try a new App. Below are some examples of how the IWA change consumer’s behavior and the industry landscape.
Wechat Pay transformed how Chines People distribute “red-envelope”
Wechat Pay considered one of the most innovative feature in China tech industry. It’s an electronic payment system akin PayPal or Venmo, however, it combines with Chinese people’s culture of giving red-envelope to friend’s and family. The Red-envelop giver can send red-envelop to a friend’s group and the participants can get random money based on the algorism. On the New Year’s Eve of 2016, more than 400 million people participated in a “red packet” campaign and sent 32 billion packets of digital cash to their families and friends during the celebration. The Wechat Pay also become one of the most frequently-used payment in online and offline channels, from different vertical e-commerce website, supermarkets, to small restaurants and mom and pop shop. In addition, Wechat pay users can also purchase wealth management products such as money market fund or the mutual funds. The Wealth management product becomes an efficient way to increase the stickiness of Wechat Pay. Currently the Wechat has become one of the most important selling channels for China mutual funds.
Hungry? A service combined “Yelp” and “Groupon” that you can share with your friends
The consumers can also order meals directly from different restaurants within Wechat. The consumers can simply click the restaurant lists shared by their friends, look at the ratings of the companies and the 3rd party App can deliver the food to your home. The Wechat channel becomes the main outsourcing channel for most of smaller restaurant’s delivery service.
In-Wechat-App become part of consumer’s life
The In-Wechat-App is really powerful for both users and developers that even the big Apps want to become part of the system. Currently Linkedin has also created an In-Wechat-App function within Wechat that the consumers can link their profile to Linkedin. Wechat has penetrated 90% of China’s mobile phone users who spent 43% of their daily mobile time on Wechat. The In-Wechat-App will further enhance this behavior to attract more service providers and Wechat will eventually build-up an ecosystem to control most of the China’s mobile market.
Next Step: Customization of In-Wechat-Apps?
The key successful factor of Wechat is that it combines people’s necessity of life with its strong social networking effect. The In-Wechat-App can not only increase the efficiency of purchase but also create opportunities for people to share with their friends. The consumers prefer the In-Wechat-Apps over native Apps because it’s convenient and neat. However, with more and more In-Wechat-Apps, it becomes harder and harder for consumers to choose from and becomes a regular Apps Store. I believe Wechat can solve this problem by using big-data to customize the In-Wechat-Apps functions for different customers, based on their daily payment behavior or friend’s behavior. (720 words)
Source:
- The Economist “China’s WeChat shows the way to social media’s future”
- Morgan Stanley research “Monetization Functions Gaining Momentum on WeChat”
- Nomura research “In-Wechat apps: potential under appreciated”
- Deutsche Bank research “WeChat 2016: new features”
- Samsung Securities “Expansion of Tencent’s WeChat marketing platform”
- eMarketer “How Many Apps Do Smartphone Owners Use?”
I really enjoyed reading this since it shows a major difference in the Chinese and the rest-of-the-world app ecosystems. I have noticed the exact OPPOSITE trend in the US app ecosystem, as the trend now is for apps to break apart and become simpler. For example, Facebook separated its messenger app from its main app, Foursquare broke apart its review app from its social check-in app (Swarm) and Google now has about 5 apps for messaging.
To me, it is fascinating how China and its consumers have preferences so different than that of the rest of the world, where certain apps and companies (baidu, alibaba ect…) gain nearly monopoly marketshare while international entrants fail at spectacular rates. Conversely, these Chinese apps and companies have barely made a dent in western market culture and sales.
I wonder then to what extent wechat could expand outside of China, or if that is the only frontier for them. Could they find a way to be the seamless, paypal, venmo, messenger, yelp, groupon for the world?
Interesting post, Derek. I found it fascinating to learn that “In-Wechat-Apps” combine third party Apps into the one platform without requiring downloading the native 3rd-party App. I believe that the trend of installing and using fewer apps is a global one, that can also be observed in the U.S.
I wonder why Facebook has not taken a similar approach. Facebook apps were very popular at some point (e.g. Zynga games such as FarmVille and Mafia Wars [1]). Zynga eventually was listed in a cnn.com article “The top 10 tech ‘fails’ of 2012” [2], however I believe that mostly relates to its lack of viability as a business model due to the constant pressure to produce new viral games, and not its nature as a Facebook game.
[1] Wikipedia. 2016. FarmVille – Wikipedia. [ONLINE] Available at: https://en.wikipedia.org/wiki/FarmVille. [Accessed 20 November 2016].
[2] Wikipedia. 2016. Zynga – Wikipedia. [ONLINE] Available at: https://en.wikipedia.org/wiki/Zynga. [Accessed 20 November 2016].
Hi Derek, thanks for the post! I also wrote on China tech – and on Hong Bao / WeChat /700HK!
One of the issues I found most striking was that of regulation. It seems from reading your post that you’ve looked at a similar issue but from a different angle. How do you see the relationship between Tencent and Beijing evolving, especially if they continue to consolidate access to apps? Do you think it will get to a point where Beijing will intervene?
I personally find the WMP/hongbao type angle the most sensitive to interference from CSRC – what are your thoughts?
On a separate note, I’m interested in how WeChat has faired in the Greater China area – how does Taiwan think about the different messaging apps? Isn’t Line more impactful there? Do you think this will change?
Thanks!
I certainly noticed this trend as well. I am however not bullish on the model WeChat incorporating too many functions. Certainly maybe it works in China, but at some point this may just breakdown because no one can navigate an app that complicated.
My other thoughts, as a WeChat user, is that the functions are embedded too deep, and there is lack of cross-platform compatibility. For instance, I am not even sure you can look up the WeChat moments on a computer. I think the reason for other companies to break down big apps into smaller ones is to drive overall usage and engagement. WeChat is wildly successful, but just from a pure usability point of view, I think it has been stagnating compared to many popular apps outside of China. And I do not think WeChat has innovated much besides incorporating more and more IWP which I barely use.