Tencent (the most powerful company in China) Part four.

 The app that beat Tencent’s QQ in China (WeChat).

 

But interestingly, the one app that would eventually surpass QQ, was also created by Tencent. Tencent had already succeeded with QQ’s desktop chat app, which had now evolved into a website portal with online games and other internet services. But in 2010, mobile internet was beginning to rise in popularity very quickly; many China people began using a smartphone. The pony was paranoid that with the switch to mobile happening, a new startup could displace their dominance. So he decided Tencent needed to create this new startup itself.

 

Internally within Tencent, Pony created three separate teams to work on a new mobile messaging app, meaning they were competing against each other, and also competing against Tencent’s desktop app QQ. This practice of teams internally competing at Tencent is normal. In fact, the culture of Tencent has been described as a “shark womb”, referencing how some unborn sharks cannibalize siblings in the womb to ensure their own survival.

 

So basically rather than put all their eggs in one basket, multiple teams at Tencent work on a concept, like a new mobile chat app in this case, and the best survives. Or as Pony himself has said: ‘You either wait for someone else to kill you, or you do it yourself first’.

 

So Tencent began work on their mobile chat app that they wanted to essentially be a clone of Whatsapp and Kik; a free mobile chat app where people could send messages to their contacts using wifi or mobile data. Interestingly Tencent had actually tried to buy Whatsapp for 10 billion dollars rather than starting a new app from scratch, but because Pony Ma had to have back surgery the cushions got delayed. At that time Mark Zuckerberg swooped in and bought Whatsapp for $19 billion. And some think the possibility of Tencent’s buying Whatsapp prompted Zuckerberg to close the deal so quickly.

 

Either way, after the WhatsApp deal fell through Tencent decided to pursue their own chat apps instead, and in January 2011 they launched WeChat - although in China it has the name Weixin.

 

Unlike QQ which had been developed for desktops, WeChat was specifically made for mobile. Despite this, the app was not a massive hit right away. But it did start to gain attraction in China when Tencent’s added a feature called ‘push-to-talk’, which allowed people to easily record a voice note, and it would convert what you say into a text message. This was immediately a very popular feature, but once again, it was copied from someone else - an app called TalkBox.

 

You see at first Tencent had offered to buy TalkBox, but whilst negotiations were ongoing, Tencent’s just replicated Talbox’s app within WeChat by themselves and inevitably beat TalkBox with their superior resources. In later years, companies in China would learn that an offer from Tencent was actually an offer you couldn’t refuse - you either lose your company by selling to them or lose your company by them copying and crushing you. At least if you sell your company, you make some money.

 

When Pony was asked about this at a conference in China, he said “In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share, In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China–execution is.” So, WeChat was now gaining momentum in China - and just like with QQ, Tencent did not want to keep it as just a chat application. In fact, because WeChat was a mobile app that people would always have with them wherever they were, Pony quickly realized that the number of services they could connect to WeChat was seemingly limitless.

 

For example, within WeChat’s app, Tencent’s introduced a feature called Moments - basically their version of Facebook or Instagram, a real-time social media feed of posts, images, and articles. Following the success of this, they added a blogging service called Public Accounts so people could write articles which could then be shared on Moments. There were also Official Accounts, allowing publishers to distribute content and businesses to distribute products and services.

 

By 2012, WeChat had 100 million users. Remember it only launched in 2011. Thus making it the fastest social media growth in history, taking only 433 days to hit 100 million users. For context, it took Facebook around 5 years. A year later in 2013, WeChat was at 300 million users. But the key to WeChat’s eventual dominance in China was that Tencent’s just kept bundling more features in this same app.

 

For example, they added quirky features like ‘Drift Bottle’, which was a service within WeChat to help people find new friends or dates. You essentially put either a voice or text message in a virtual bottle, throw it into a virtual sea, and then another random user picks it up and decides whether to reply to your message or throw it back for someone else to get. This actually became a really popular feature, with many China people making genuine friendships and relationships through it. And for some people, it became a hook-up app.

 

The situation that creates WeChat Pay.

 

Tencent’s also created ‘Friends nearby’ for a similar purpose, which was like an early version of Tinder, and helped WeChat grow even faster. But one of the most crucial developments for WeChat came about kind of by accident. You see, in China, it’s a tradition that during the Lunar New Year, people charitably give away red envelopes and packets containing money. So WeChat decided to create a red packet function within their app so people could digitally send red packets to people, which transferred real money to their accounts. During that holiday, over 75 million red packets were sent via WeChat. This led Tencent to a clear realization: mobile payments were the future. This feature which was meant to be a fun little temporary thing over the holidays ended up leading Tencent to create WeChat Pay, their mobile payments platform to digitally transfer money. Before long, the WeChat wallet feature was not just used to send payments to other people, but as a way to pay for things in shops, and in fact, basically, anything where money needed to be sent or paid. Rather than carrying around a credit or debit card, it was easier to just use WeChat since their bank details were already connected.

 

Once again, this may seem like an obvious feature today, but back in 2013 when it launched in China this mobile payment function was an incredible feature, and hence helped WeChat become even more popular. And as more and more people in China started predominantly using smartphones, eventually WeChat surpassed QQ. Even though they were both started as chat services run by Tencent, WeChat was definitely better for mobile - and mobile was becoming much more widely used in China. By 2015, WeChat crossed half a billion users. Of course, whilst the app name hasn’t changed, chatting is now just a tiny fraction of what WeChat does. This leads us to the most crucial feature of all for WeChat - the feature that turned it into the super app it is today that dominates the lives of almost everyone in China.

 

The next feature (Mini programs)

 

In January 2017, WeChat launched a feature called Mini Programs, which allows users to access tens of thousands of other apps within WeChat own app, completely bypassing the need for an app store. So for example, instead of you having to download a separate app for every single restaurant, hotel or shop you go to - they’d all just have a mini-program within WeChat. This not only allowed WeChat to connect itself to people’s offline lives as well as online, but it helped cement WeChat as the everything app. Even before this, Tencent had created so many of their own services bundled into WeChat - like payments, games, and dating - but these Mini programs feature meant there was basically no need to even have other apps on your phone because services from other businesses were now available via WeChat as well.

 

For example, China’s dominant ride-sharing platform Didi has its own mini-program within WeChat, so if you want a taxi you don’t need a separate app. Or there’s a mini-program within WeChat for food delivery or tracking parcels and pretty much everything else you can think of.

 

So, to demonstrate this, let’s imagine for a moment you’re a China citizen, and you’re meeting a friend for dinner. You call them through WeChat to confirm the plans, and you book your taxi to the restaurant via WeChat. In the taxi, you play games and browse the news via WeChat. Send your friend your location via WeChat. Access the restaurant’s mini program via WeChat, which means you can view their menu via WeChat. Then take a photo of your food and post it on your social feed which is on WeChat. Pay for the meal via WeChat. Then afterward if you want to watch a movie, guess what, you book your tickets through WeChat.

 

Essentially, imagine your life without a smartphone at all, and in China, that’s what life would be like without WeChat. Ok, I think I’ve said the word WeChat too many times. But anyway, as a result of this mini-programs feature, Tencent has essentially become the gatekeeper to the market for other businesses - since people don’t really need to use the app store when WeChat has everything inside of it, so companies almost have to partner with Tencent’s in order for their services to be used. But this means Tencent can effectively tax all other companies by taking a percentage of the revenue generated through their mini-programs. Now, what’s interesting is that an all-in-one everything app like this has been suggested outside of China as well.

 

in fact, even quite recently Elon Musk talked about X, a super app similar to WeChat. But it was quickly shut down. We have enough concerns about big tech and social media, without one single company controlling everything. But you can see now why Tencent has become a money machine. Because unlike many of the big tech giants in the west, such as Facebook and Google, Tencent doesn’t need to rely so heavily on advertising revenue. In fact, some of Tencent’s staff joke about how Facebook’s business model is very primitive. There’s a quote from a Tencent employee saying: “When you have a billion users, the last thing you should be thinking about is how do I sell them a ton of ads. What you should be thinking of instead is how to ensure you keep these users happy, so you don’t drive them away because you’re annoying the hell out of them.” And that’s what’s notable about WeChat: it has kept a pretty clean interface, and doesn’t spam users with ads - it doesn’t need to. They make so much money through micro-transactions since they are involved in so many aspects of people's lives. When you have over a billion people using your app for so many different parts of their life every single day, those small fees on every transaction add up in a massive way.

 

However, given that WeChat dominates people’s lives in China, you may wonder why it’s not so popular outside of China? Whilst we don’t have confirmation of exactly how many people use it outside of China; estimates suggest possibly up to around 100 million, which is decent, but it’s a tiny fraction compared to the well over 1 billion people inside of China who use WeChat. And most of the people who use WeChat outside of China are China ex-pats living abroad or people needing to connect with others who are in China.

 

Why the rest of the world didn’t adopt it.

 

So if WeChat is so useful in China, why didn’t the rest of the world adopt it? Why doesn’t Tencent expand more in other countries? Well, this is where things get dark. The simple answer is that the same reason Tencent’s apps are so big in China is precisely the reason they’re not so big anywhere else. 

Click here to read part five