Tencent and WeChat with Eva Xiao

In the final of the two parter episodes, we continue our conversation with Eva Xiao from Technode on the Tencent Group, specifically focusing on WeChat, the most popular messaging app in China. Eva dissected how WeChat is the platform for other popular online to offline (O2O) services and dived deep into the various monetisation models which the messaging app has built from WeChat pay to official account pages. We also discussed whether Wechat is cannibalizing QQ and how Tencent perceives disruption within their company. Last but not least, we examined Tencent’s investment strategy in gaming and their foray into new areas such as healthcare companies.

Here are the interesting show notes and links to the discussion (with time-stamps included):

• Eva Xiao, Reporter at Technode.com (@evawxiao, LinkedIn, Wechat: evawxiao , Technode) 
• If you have missed part 1 of our conversation, check out our earlier episode 109 with Eva Xiao on Tencent and QQ.
• Reference: Tencent 2015 Annual Report.
• WeChat [0:43]
  • Official data on WeChat from Tencent: 697M monthly active users by end of 2015 with YoY growth of 39%, and recently reaching 800M monthly active users in Q1 2016. [0:46]
  • What are the core revenue drivers for WeChat? [0:57]
    • WeChat Wallet: charging a transaction fee. [1:05]
    • Official Accounts (brand pages for content marketing) [2:00]
  • How does WeChat work for the consumer? [3:16]
    • WeChat is focused on the user and protects users’ privacy. [4:33]
      • Content is compartmentalized: You have to go to “games” to game and click on “official accounts” to read content from companies (companies can’t spam your moments with their posts)
      • WeChat bans companies from offering incentives for follows or shares
      • This includes following an account for a discount code or to get an answer from a quiz, asking users to share a message
      • Tencent bans companies from “exaggerated wording” as well, like ‘If you don’t share, you’re not a true Chinese’ (from WalktheChat blog)
      • Tencent bans rumors, dirty jokes (this is also related to the Chinese government, which disapproves of the spreading of rumors)
      • Tencent bans data collection unless the user consents to it (must be made explicit)
      • Tencent bans H5 games and quizzes
      • Penalties range from temporary blockage of a post to a permanent ban of the official account
    • Marketing and branding tools for companies, both small and large enterprises.
    • Consumers can purchase goods through official accounts, get access to wifi, rent a car
    • Lower barrier to entry than standalone app development
    • Customizable through HTML5 pages and WeChat’s developer API
    • At the same time, WeChat has rules to protect its users, ex: frequency of posts (4x/month or daily, depending on account type)
  • What are the convenient & accessible services? Online lifestyle play by Tencent. [6:23]
    • Paying bills
    • Topping up your phone
    • Ordering food, taxis
    • E-Coupons
• Launch of Enterprise WeChat (launched on 18 April) is meant to help reduce “WeChat fatigue” by offering users more tools to separate work and personal life. [8:16]
  • Is it similar to Slack in the US?
  • Ex: Users can block messages outside of working hours
• How does Wechat monetise from their platform for example, Didi Chuxing? [10:16]
  • Transaction fee through WeChat Wallet (.1 yuan, or .1 percent of the transaction if sum exceeds 1,000 RMB)
  • Official accounts and merchants are charged a %0.06 transaction fee (data from 9/2015)
  • WeChat Wallet has 200 million users and how far are they from Ant Financial aka Alipay? [11:22]
    • Ran very successful CNY marketing campaigns (ex: partnering with the Spring Festival Gala for its “Shake Shake” promotion), trying to take more of Alipay’s (Ant Financial, Alibaba) market share, which is currently around 70% 
• Investment into other messaging apps: Tencent made a strategic investment in Kakao Talk, any thoughts on why they did that? [14:14]
• Tencent and Disruption [15:23]
  • Is Wechat cannibalising QQ? How does Tencent deal with disruption? [15:23]
    
  • William Bao Bean‘s view of Tencent as a single large incubator with many startups within.
  • QQ & WeChat are deliberately separate so the products develop independently
    • Comparable to the development of the XBox during Microsoft’s Bill Gates era (two teams developed a game console separately, final product used the OS of one and the outer design of the other)
  • Tencent used to be more hostile to startups (ex: copying features), but is now more collaborative and sees early-stage startups as potential partners or additions to the Tencent ecosystem. 
    • It’s like crowdsourcing – a way to get a diverse collection of ideas without investing too much capital/resources
    • Lets its investments growth independently, supports the founder, but is not controlling (according to Martin Lau, also other anecdotal support)
• Tencent is active in venture capital investments and acquisitions. Can you talk about some of the interesting companies which they have invested? [19:23]
  • For example, Cyanogen and Lyft in US (Crunchbase, Tech In Asia)
  • Growing its ecosystem: WePiao, Didi Chuxing, Meituan-Dianping, Jing Dong (JD), Edaixi (laundry)
  • Overseas expansion: instead of having to deal with acclimating to local culture, hiring a local team, adjusting their product, part of Tencent’s strategy is investing in other companies. For example, it bought the remaining shares of Riot Games last December (before that, it owned 93% of the company’s shares), giving it afull control over the huge gaming company responsible for League of Legends
    • In the case of Lyft, for example, Tencent can invest and leverage Lyft’s already established network and business in the US, instead of having to create its own ride-hailing product for North America
    • Snapchat, Kik, Kakao Talk
  • Interest in healthcare
    • Scanadu (mobile medical device company, US), Picooc (smart scales, China), WeDoctor (formerly Guahao, China), Medlinker (China)

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The show is hosted by Bernard Leong (@bleongcw) and are sponsored by Ideal Workspace (Twitter, Facebook and LinkedIn) with their new Aspirus Desk on Indiegogo (Twitter, Facebook, Medium). Also check out Ideal Workspace’s new standing desk, Aspirus and sign up for their mailing list. Sound credits for the intro music: Taro Iwashiro, “The Beginning” from Red Cliff Soundtrack.