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WeChat Renamed “WeAd”, Except The Name

by User Not Found | 7月 23, 2014

Messaging is dead! Long live messaging!

According to Strategy Analytics’ Global Mobile Messaging Forecast, real-time mobile instant messaging will continue to grow out to 2017, exceeding 1.8 billion users and generating well over 18 Trillion in sent messaging volumes.

However, it’s no longer the messaging services we have known since the mid-1990s.  This is no news: in the last few years, OTT messaging service has beaten mobile carriers’ SMS services to become smartphone users’ preferred messaging platform, and on the way destroyed the value of carrier messaging.  However, one OTT service is different from the next one.  A glance at the user interface of WhatsApp and that of its competitors from Asia, e.g. Line, KiK, Viber (now part of Rakuten) and WeChat, the most striking impression one gets is how few additional features WhatsApp, and in a way,  Skype, provides in addition to messaging, compared to the others.  There are also differences in the monetisation mechanisms.  WhatsApp, despite its acquisition by Facebook, continues its subscription based monetisation strategy - $1 per annum with the first year free.  But the Asian OTT messaging services, e.g. Line and Kik, have developed the OTT messaging services into distribution platforms of value-added services, e.g. digital stickers and mobile games.

 

The latest numbers show that, WhatsApp has over 500 m monthly active users, WeChat close to 400 mi, and Line Kik Messenger 150 m.  With such large user bases of the leading OTT messaging service providers, both monetisation methods can be justified.  But it does look to us that the players from Asia are more inventive, and in a way, more aggressive in their monetisation push.  In addition to selling stickers and games, they also facilitate functions like:

 

  • In-app transactions and advertising account for over $15 B of the handset-based app ecosystem;
  • Sponsored channels for brands to communicate and reach customers directly

 

Among them, WeChat (owned by one of China’s Internet heavyweights, Tencent) has provided a topical case.

 

In addition to all the functions above, Tencent enabled payment on WeChat (through pairing bank cards to users’ WeChat account) late 2013.  On the 7th of July, Tencent opened the platform to advertisers.  In essence this is no different from other advertising channels, but two things have made this initiative worth being given some close attention:

 

  • The new platform enables advertisers, with verified WeChat accounts, to pay for ad placements on other companies’ official accounts, regardless / even if them being competitors.  We find this both ingenious and treacherous.  On one hand, companies will be able to deliver adverts and offers to consumers that have declared an affinity to a competitor brand, product or services. For instance, a consumer with an affinity for products from Li-Ning, and that has signed up to receive communications (e.g. offers, coupons, event alerts) from Li-Ning, will presumably see adverts from competing sports brands, like Adidas. This is clearly of value to Adidas and provides opportunities to reach customers based on behaviour and preference, rather than only on demographics (age, gender, income). Likewise, Li-Ning will be able to target Adidas users for products and offers – positioning WeChat to benefit from both sides.  On the other hand, this could potentially fan more animosity between competitors, while diluting WeChat’s appeal of what many marketers will view as a one-to-one communication platform with opted in users.
  • For the first time in China, more online events are taking place on mobile than on desktop: 83% of China’s Internet population are going online through their mobile vs. 81% on their PCs, according to the latest official Internet report.  With its indigenous “mobile” nature, WeChat (who has a very basic browser-based client) is clearly aiming to take a share of the $ 40 B mobile advertising market.  Chinese consumers may “dislike” in-app advertising, they can accept it in exchange for the free use of the apps, so long as the advertising doesn’t get too intrusive, according to a new report from Strategy Analytics.  In this case, WeChat users may not have to pay the 1 dollar (as the users of WhatsApp do) to use the feature rich messaging service, but an alarm bell may be ringing for companies like Baidu, who, despite its dominant position in online search hence online advertising in China, has not expanded fast enough to replicate its dominance in mobile.

 

As Facebook has shown with the success of native ads placed into users mobile newsfeeds, social platforms that have scale and which can offer effective targeting (demographics, interest, behaviour) will attract ad dollars. If this trend continues, Google may also start feeling the heat.

 

Nitesh Patel & Wei Shi

 

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