China and ‘WeChat’ May Change the Way we Use the Internet

Female electronic payment  close-up cell phone hand shop electronic reader

Saturday is finally here. You have a great game of golf planned with friends.

After spending all week exchanging banter about today’s game on the WhatsApp golf group chat, you can’t wait.

You drive to the golf course. Using Waze, of course, to avoid traffic.

On the golf course, you take a selfie of the group. And share it on Instagram.

After the game you’re hungry, so you go for lunch and beers. You use Apple Pay.

And once you’ve drunk a bit too much, it’s time to go home. So you order an Uber.

The truth is apps have become a large part of our life. We use at least one, if not more, of them to get through any given day.

But what if I told you that you could use one app to do all the above, and more?

That can’t be. You would have heard of it, right?

Well, there is one; Weixin.

Weixin and Tencent

Weixin, owned by Tencent [HKG:0700], has 700 million users. Even with so many users, there is a reason why you may not have heard of it.

It’s a Chinese App.

The fact is, the digital world seems to be split in two: China, and the rest of the world.

The Chinese market is an attractive one. It has a large and growing middle class of consumers. But it’s also a hard market for tech companies to enter.

Chinese internet is more like a large intranet. There is a ‘great wall’ controlling what can and can’t come inside. And new entrants have to compete with Chinese apps and a maze of strict government regulations.

Uber is a recent example of western companies failing to enter China’s market. Uber’s CEO, Travis Kalanick, had vowed to spend millions winning over the Chinese market. But had to admit defeat, and ended up selling Uber’s operations to Chinese competitor Didi Chuxing.

And Uber is not the only one to fall flat on its face. Google and Facebook have also tried and failed. Google has even attempted it more than once!

And it works both ways.

Chinese companies trying to break into the western world have been unsuccessful to far.

Weixin or ‘WeChat’

Take Weixin, for example. In 2012, Weixin rebranded its name to WeChat, to enter the international market. And even hired the best football player in the world, Lionel Messi, to be the star of their TV ads.

But the app didn’t catch on.

Why? Because it did’t have the same functionalities as it has in China. You could only use it to chat and send photos. So there was no real difference from WhatsApp or Facebook Messenger.

China’s giant online retailer, Ali Baba [NYSE: BABA], also tried to enter the US market. They went after Amazon [NASDAQ: AMZN] with the online shopping site 11 But only after a year in business they ended up selling their operations.

It seems like companies have to choose between going into China, or the rest of the world.

And while China has shut out big players like Google [NASDAQ: GOOGL], Twitter [NYSE:TWTR], YouTube and Facebook [NASDAQ:FB], it has also developed its own versions of these sites.

You may think these companies are just copycats. But, as they have developed away from the main internet, they have grown in a different way. They have more functionalities.

In fact, some of them are lightyears ahead of the western apps.

Take WeChat — or Weixin — for example.

WeChat has tripled its user base in the last three years.

Tencent Wechat User base

Source: Techinasia

Their reason for their success was due to Tencent spotting trends in the market, and quickly adding functionalities.

You can chat and send photos. But you can also order at a restaurant, pay with your phone, hail a cab, make a doctor’s appointment, find a date, check the heat map of your favourite shopping mall to see how crowded it is, and more.

It is a Super App. And that is something that every app strives to be: everything for everyone.

And all the while, it is compiling data. It knows your spending habits, where you go, who you go with. Everything.

Leaving the privacy issue aside, this is a gold mine for advertisers. They could have all the combined data of all the big apps in the western world, in one place.

And there is nothing like this in the west.

According to Forbes, in the first quarter of 2016, WeChat generated $1.8 billion in mobile revenue. Compare that to WhatsApp’s $49 million, or Facebook Messenger’s big fat zero.

Companies are now trying to emulate WeChat. In fact, Facebook may have been thinking of WeChat when they bought WhatsApp and Instagram.

And western companies may now start looking at the east to become the copycats.


Selva Freigedo,
For The Daily Reckoning

PS: Selva recently joined the Port Phillip Publishing team as our macroeconomic analyst. She works closely with The Daily Reckoning editor Vern Gowdie on his advisory service,The Gowdie Letter.

Selva Freigedo

Selva Freigedo

Selva Freigedo

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