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Battle of the internet giants: Facebook, WhatsApp and the rise of China's WeChat

Battle of the internet giants: Facebook, WhatsApp and the rise of China's WeChat
Published 20 Feb 2014 

Facebook's hefty US$19 billion purchase in cash and stocks of WhatsApp has stunned Silicon Valley, but could it be that the acquisition was partly motivated by the stunning rise of Asian messaging apps like China's WeChat?

From fake iPhones to pirated DVDs and imitation architecture of the Sydney Opera House, China is a nation notorious for its copycat culture. But WeChat, a messaging app by Chinese internet giant Tencent, may be an example of the innovation that exists within this culture.

Inspired by messaging apps like WhatsApp and Japan's Line, WeChat has since evolved into a mega online platform — part Facebook, part Instagram, a mobile news platform, mobile wallet and e-commerce store. It even comes complete with its own online mutual fund. Facebook's announcement to buy Whatsapp, combined with its $1 billion purchase of photo-sharing app Instagram last year, may have been influenced by the rise of mega-platform messaging apps across the Pacific.

Facebook and WeChat appear to have distinct business models. In a Facebook release, founder Mark Zuckerberg said 'WhatsApp will continue to operate independently within Facebook.' Similarly, when Facebook purchased Instagram, Zuckerberg noted that the two platforms were 'different experiences that complement each other...we need to be mindful about keeping and building on Instagram's strengths and features rather than just trying to integrate everything into Facebook'

By contrast, WeChat provides a centralised smorgasbord of experiences. Users can post and view their friends' feeds, filled with status updates, photos, videos and news articles. There’s a 'hold to talk' walkie-talkie function, group chats, and individuals can literally 'shake' their phone to find fellow users in the vicinity. On the eve of Chinese New Year this year, 10 million messages were sent over WeChat each minute.

Over the Chinese New Year period, 40 million virtual 'hongbao' were sent by WeChat users to friends and family, a smartphone spin on the Chinese tradition of exchanging red packets of money to celebrate festive occasions. [fold]

The genius behind this was that in order for WeChat users to give and receive these red packets, they had to bind their bankcard to their WeChat account. This is a huge win for WeChat, which is hoping to become a mobile wallet and one-stop-shop for users. Already, WeChatters can buy movie tickets, pay taxi fares and make purchases at vending machines scattered throughout Beijing's subway network.

It's not just large companies hedging their bets on WeChat's online sales. There have been tens of books written on how individuals can turn their WeChat account into an e-commerce hub. This Valentine's Day, WeChatters could buy chocolates, roses and even rent wedding dresses through the app. Taking orders via WeChat, university students have turned their dorm rooms into fruit stores. The success of Powerful, one of China's high-end sex store chains, is partially attributed to the co-founders' avid use of the online platform. 

Facebook has been blocked in China since 2009 and may be hoping that WhatsApp could be a way into China’s enormous online market. This will be difficult because WeChat already has a critical mass of Chinese users and has fine-tuned its products to their tastes.

'Social media is deeply connected to the people using it, so Chinese social media is very much tailored to the Chinese market and Chinese users,' explained Wei Wuhui, a technology expert at Shanghai Jiaotong University, speaking to The Interpreter over Skype. 'While inspiration for WeChat may have come from messaging apps like WhatsApp or Line, today WeChat has evolved into something very different from those apps.'

WeChat reported 272 million active monthly users last year, up 124% from the previous year. This is still a way off from WhatsApp's 450 million monthly users, 70% active on a given day. But the competition is heating up and WeChat's sights are set overseas. The company spent $200 million in overseas advertising campaigns last year, with LeBron James and Lionel Messi involved in their international marketing.

Will WeChat crack the Australian market? Australia is already dominated by WhatsApp and Facebook, companies that may be perceived as less sinister than WeChat, an app monitored by the Chinese government.

If WeChat's parent company Tencent is successful in its overseas expansion of the app, WeChat could have a valuation comparable to WhatsApp. Then these two internet giants, Facebook and Tencent, really would be locked in a global, head to head battle.

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