Popular Chinese social networking app blazes its own path

New York TimesJanuary 26, 2014 

CHINA SOCIAL APP

Allen Zhang organized the team that began in 2010 to develop Weixin, or WeChat. Three years after introduction in China, Weixin has nearly 300 million users – a faster adoption rate than either Facebook and Twitter –giving the app a dominant position in what is now the world’s biggest smartphone market.

QILAI SHEN — NYT

— Every half-hour or so, Jenny Zhao, young and wired, unlocks her iPhone 5 to connect with friends using Weixin, China’s wildly popular social messaging app.

“I’m probably on Weixin six hours a day,” says Zhao, 24, a cosmetics marketer in Shanghai. “A lot of what I do revolves around it.”

Weixin (pronounced way-shin) is this country’s killer app, a highly addictive social networking tool that allows smartphone users to send messages and share news, photos, videos and web links, much like WhatsApp in the United States, or Line, a Japanese communications and messaging app. In the United States, a similar version is known as WeChat.

Just three years after being introduced in China, Weixin has nearly 300 million users – a faster adoption rate than either Facebook and Twitter – giving the app a dominant position in what is now the world’s biggest smartphone market. It has already stopped the growth of the messaging service of the country’s biggest mobile phone company and provoked China’s largest Internet companies to create competing services.

Weixin is the creation of Tencent, the Chinese Internet powerhouse known for its QQ instant messenger service and its popular online games. Tencent also paid $330 million in 2012 for a minority stake in Cary-based Epic Games.

Tencent, which is publicly traded and is worth more than $100 billion on the Hong Kong exchange, is seeking to strengthen that grip in social networking and expand into new areas, such as online payment and e-commerce.

Alibaba, China’s e-commerce goliath, has announced plans to fight back in China, with its own newly developed messaging app, called Laiwang.

Tencent, meanwhile, is so confident of its messaging app that it is promoting Weixin overseas, particularly in Southeast Asia, where there are tens of millions of users. The company also plans a marketing blitz in Europe and Latin America, using the name WeChat. The company declined to say whether or when it would promote the service in the United States.

Weixin could help change global perceptions of Chinese companies. Although Chinese Internet companies are still considered knockoffs of Google, Facebook, Twitter and eBay, analysts say they are quickly transforming themselves into dynamic, innovative technology companies with unique business models.

Amalgam of tools

Weixin, for instance, is no mere copy of an existing service but an amalgam of various social networking tools: part Facebook, part Instagram and even part walkie-talkie. Rather than send a short mobile phone message by typing Chinese characters, which can be time-consuming, users simply hold down a button that records a voice message.

“Chinese Internet companies are no longer behind,” says William Bao Bean, a former technology analyst who is now a managing director at the venture capital firm SingTel Innov8. “Now, in some areas, they’re leading the way.”

The disruptive powers of the service are indisputable. Weixin has stunted the growth of China’s popular microblogging service Sina Weibo, and eroded the profitability of a service offered by China’s big, state-run telecommunications operators: the mobile phone short message service known as SMS.

At China Mobile, the country’s biggest mobile phone service provider, revenue from short message services peaked in 2009 at nearly $9 billion. Three years later, it was down nearly 20 percent from that high, and it very likely dropped again last year, according to recent estimates.

In August, a technology analyst at Barclays forecast that Weixin could have 400 million users and nearly $500 million in revenue this year. With investors anticipating such growth, shares of Tencent have soared 94 percent in the past year.

Life and death

Some Tencent executives even view Weixin as a company savior. Last year, Tencent’s chief executive and co-founder, Ma Huateng – known in English as Pony Ma – said during a speech that the power of Weixin was that it was mobile, like a “portable organ” that unlike a PC was always with the user.

If Weixin had been created by another company, Ma went on, Tencent might have gone into decline. “Looking back,” he said, “those two months were a matter of life and death” for the company.

There are challenges, of course. One, analysts say, is that China’s tech-savvy young people are fickle, and could just as quickly switch to other messaging services. Another challenge could come from Tencent’s rival Alibaba, the Chinese e-commerce company that has all but declared war on Weixin.

In August, Alibaba barred vendors on its Taobao.com shopping site from using Weixin to market their products. Alibaba then introduced its competing service, Laiwang, and announced plans to introduce a mobile games platform.

Tencent’s overseas expansion plans could also be hampered by concerns about a Chinese company’s handling so much personal information, and then being forced to turn it over to the Chinese authorities, which have tight controls over Internet services.

Tencent executives insist the risks of spying are small because the company does not store messages on its servers.

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