WeChat, the shape of the connected China

It is licensed under the Creative Commons BY-NC-SA license to allow for further
contributions by experts and users in the coming months.
You are free to share and remix / adapt the work.
You must cite this document: WeChat, the shape of the connected China, January 2019.
You may distribute a modified work under the same or similar license.
You may not use this work for commercial purposes.
Why do we release this kind of work for free?
Our job is to help large organizations think and act like startups. We believe this can only be achieved by encouraging
people to innovate and explore new business models. We aim to inspire you by giving you the keys to understanding new
markets, new business drivers like APIs or successful companies like Apple, Amazon, Facebook or LinkedIn.
This work was made for you to share, reuse, remix, rework…
-

Stéphane Distinguin
Founder & CEO
of FABERNOVEL
ince 2006 FABERNOVEL has been producing annual studies which are accessible to all, thus
completing one of its missions: to contribute to the understanding and accessibility of the digital
revolution. They are an opportunity to go further and deeper in the exploration of the latest innovation
topics, and give their readers the ability to take a step back and to really observe the digital age.
By developing clear frameworks, they help in deciphering today’s biggest recipes for success which
worked for the GAFA, unicorns and Chinese giants. The aim is to analyze all the competitive dynamics
of this new economy, its performance factors and its development strategy.
After Uber in 2017 and Tesla in 2018, we’ve decided to dedicate this year’s annual study to the analysis
of the WeChat phenomenon. More than ever, the model’s applicability and exportability raises
questions – while a slowed-down Chinese growth in 2018’s third trimester (6,5%!), and a trade war with
the US, has got some observers worried.
S
Foreword
-

From “Made in China” to “Designed in China”
-
of global patent
applications in 2016.
of the world’s VC funding in the first half of
2018. For the 1st time, China has overtaken the
U.S. in startups fundraising
of the world’s unicorns total valuation,
behind the US (49% of the total). 3 chinese
unicorns among the top 6.
Shanghai: explicitly aims to become
a global centre for both financial services
and technological innovation.
Key players: Mobike, Lufax, Pinduoduo
Beijing: headquarter of 40 unicorns
and said to be the “best startup environment
in China” with numerous investors and VCs.
Key players: Baidu / Didi / JD.com / Xiaomi /
Lenovo / OFO / Toutiao
Shenzhen: the “Silicon Valley for
hardware” due to the proximity of tech
firms in southern Guangdong province.
Key players: Tencent / Huawei / DJI
(drone)
Hangzhou: symbol of China's ongoing transition
from a manufacturing centre to a technology
and service-based economy.
Key player: Alibaba
The Chinese powerhouse is
driven by dynamic
metropolitan hubs
Sources: Marketing to China, FABERNOVEL estimations, JLL, WIPO, KrAsia, CB Insights
⅔
47%
26%

China has nurtured homegrown digital champions...
-
The Great Firewall has allowed China to forge
its own path in terms of technology
China has developed a “digital protectionism” policy to prevent
foreign competitors from jumping into the Chinese market
and preserve its Internet sovereignty.
Sources: Sloan Review, Forbes, Council on Foreign Relations
A Master Plan to take leadership in design,
software and production
In 2015, China launched a strategic 10-years plan called “Made in China
2025”, in order to target a leadership position in key technologies and
industries of the future.
China 2025 sets ambitious targets: 70% “self-sufficiency” in high-tech
industries by 2025 and a dominant position in global markets by 2049.
Amazon
Google
Uber
Facebook
Apple
Best Buy
Alibaba
Baidu
Didi
WeChat
Xiaomi
JD.com
We should respect the right of individual countries
to independently choose their own path of
cyber-development”
Xi Jinping, president of the People’s Republic of China
at the World Internet Conference (2015)
Great Firewall
“

… and these champions are now deeply inspiring to the Western leaders
-
I look at some of the things we are
innovating and doing here in China.
We are going to leverage those learnings
to apply them in other parts of the world,
including the US.”
* From collaboration with Alibaba
Kevin Johnson
Starbucks’ CEO
China:
Lab of the mobile
innovation
The pace of innovation in China
is faster than in any other part
of the world.
Some of the most prominent
American brands have started to
copy what has been a success in
China.
“

WeChat figures cause vertigo
-
WeChat is the largest community of users and consumers in Asia.
In only 7 years, WeChat has became a key player on the global tech scene:
433 Days
To reach 100 Millions users
vs. 1,650 days for Facebook
Sources: CAICT, WalkTheChat
92%
Penetration rate in its first
domestic market - China
vs. 63% for Facebook
in the US
34%
Of total mobile network
traffic in China
vs. 14% for Facebook
in the US.
20.3M
jobs WeChat helped
to create in 2017
+1M
Mini-programs since
the launch in 2017
vs. 2.1M for App Store
Main social media communities in Q3 2018 ranked by MAU
MAU(Million)

WeChat is leading the “super app revolution” in Asia
-
Our phone
VS
3 main ingredients of a Super App:
1. A unique access point
2. Seamlessly integrated ecosystem
3. Its own payment solution
The promise of a Super App is clear:
One tap away from everything
Super apps mix and match a bunch of seemingly
unrelated services together in one application”
Connie Chan
General Partner at Andreessen Horowitz
SUPER APP
SUMMIT
A Chinese one
“

WeChat’s official accounts
Launched in 2013.
3,5M active accounts in 2017
for 20M registered
iMessage’s Apps
Launched in 2016
WeChat’s Wallet
Launched in 2014
Messenger’s bots
Launched in 2014.
300k monthly active
bots in 2018
Western tech leaders have started to copy it
-
Everyone in the Western world has experienced WeChat’s work, as the service has inspired a new category
of “messaging as a platform.” You don’t have to look hard to see hints of WeChat in other messaging
platforms such as Apple’s iMessage or Facebook’s Messenger platform”
Anu Hariharan
Partner at Y Combinator (2017)“

One app, 5 strategies
-
Pivoting at scale
Smartphone is not a channel, it’s a lifestyle
Value is a dynamic balancing
Network size is the new chic
WeChat is eating the world

1Don’t be afraid to
auto-cannibalize your
business
Don’t be afraid to mutate

Back to 2010, Tencent was a well-established company
-
The overall economic
environment in China
was very promising:
Tencent overall results
were outstanding:
new internet users in China
every month
10 million
Sources: Worldbank, China Internet Watch, Macrotrends, Tencent annual report
Tencent’s activities were thriving:
+10.6%
GDP growth of China
Tencent revenues evolution
between 2007 and 2010
3rd
biggest internet firm
by market cap ($36bn) after
Google and Amazon
Tencent was dominating the
instant messaging Chinese
market:
x5
QQ’s penguin was an
integral part of Chinese
popular culture
650 million
active users on QQ Messenger

WhatsApp
USA, 2009
Kik
Canada, 2010
Line
Japan, March 2011
Kakao Talk
South Korea, 2010
Facebook Messenger
USA, 2011
New contenders were entering the game, both outside and inside China. Tencent was a latecomer in this race.
At the very beginning, all these instant messaging apps had the same value proposition. It would be a
winner-takes-all battle as messaging apps are all about timing and network effect.
Feixin China,
2007
MiTalk
China, 2010
TalkBox
China, January 2011
Source: RedTech Advisors
The mobile chat apps’ race
Tencent understood the inevitable rise of a new world
-

How did they
manage this
strategic dilemma?

What did
Tencent do?
Basic design
thinking &
horizontal
diversification
-
Pick your champion after an internal
tournament…
Such initiatives was faithful to the ‘horse race
culture’ or saima: putting several teams to attack
the same challenge
… and looking closely at alternatives
In early 2011, when WeChat was struggling among
the Top 100, its major competitor Talkbox was listed
#1 on the social network app chart thanks to its
push-to-talk feature.
Tencent’s executives even made an offer to buy
Talkbox as they did not want to bet solely on
WeChat’s uncertain success.
With the WeChat 2.0 version of May 2011 and the
release of the same push-to-talk feature, WeChat
jumped from top 100 to top 5 within a single day.
Sources: SCMP, Abacus
The winning project was
granted generous financing
to continue its project
70 daysOct. 2010 Jan. 21st Wechat’s daily
user growth
< 20,000
> 50,000
Before
2.0 version
After
2.0 version

Leveraging
existing assets
to accelerate
momentum
-
In May 2011, WeChat started to leverage its massive QQ user base: account creation was made possible
through a QQ ID. Having a single login ID was much more convenient.
With the 2.1 version of July 2011, WeChat users were able to automatically import their QQ contacts into
WeChat.
Endgame
In November 2011,
WeChat reached
50 million users and
overtook Xiaomi’s
MiTalk as the first
instant messaging
app in China.
In order to ensure good pick-up rates, WeChat
smartly chose the right timing to carry the QQ
and WeChat integration.
Following, the network effects took their lead:
as contacts were integrate and users joined the app,
the interest and awareness raised amongst their
respective contacts.Network effect

Differentiating
QQ to avoid
inside
competition
-
WeChat’s incredible expansion did not kill QQ.
It was adapted to serve different needs
QQ has repositioned itself to be a colorful “one-stop entertainment portal” and fills-in WeChat’s gaps:
you don’t need a mobile number to sign up for a QQ account, a good option for young students without
any mobile phone.
Addressing specific users
In 2018, QQ’s demographic is still very young: 60% of all QQ users were born after 1990, 40% are students.
Hence, QQ has teen-friendly features like avatars, animations and cartoon characters.
With two strategic levers:
GamingVideo
In 2017, launch of QQ Light Application: a mini
program-like platform, focusing on casual
games and e-books.
In 2016, launch of a very popular short-video
service called Riji (or “Daily Footprint”) to let
users upload temporary video clips less than
10 seconds long.

Know how to impose your own
experience standards

A day in the life of Xiaolei, powered by WeChat
Persona:
Name: Xiaolei
Age: 32 years old
Profession: Head of
Marketing in a Furniture
company
Description: Xiaolei lives
and works in Shanghai,
she uses WeChat in the
same way as a typical
city resident
7AM
She checks the weather on a Mini
Program and sees that the pollution
rate is quite low today. Thankfully, there
are a few bikes in front of her house, so
she grabs one thanks to Mobike’s
integrated feature.
8AM
She needs her usual
morning coffee, so she
stops by Starbucks.
The waiter invites her
to subscribe to their
new Official Account
and use the ‘Shake’
feature to get a free
cupcake. She scans the
QR code to
immediately follow it,
and pays at the same
time thanks to
WeChat Pay.
8:30AM
Xiaolei arrives at work, she logs on
WeChat desktop, checks Beijing’s
last meeting debrief on the
Marketing group and asks her
colleagues a few questions about it.

11AM
Her client has just informed her by private message that he could not
be present for their lunch. So she suggests to a group of friends to
have lunch in the French restaurant they all like. She sends them the
link through Meituan Dianping’s Mini Program so they can directly
order from the menu before they arrive.
12PM
Xiaolei is a little bit late and won’t
have time to go the restaurant by
bike, so she books a taxi directly
from WeChat thanks to Didi’s native
feature.
1PM
She arrives at the restaurant and gets her meal 5 min after her
arrival.
She pays the bill for everybody and asks her friends through a
voice message to reimburse her via WeChat Pay. She directly
receives the money on her Wallet.

5PM
She buys hiking
clothes on JD.com’s
Official Account
before buying her
flight ticket to
Taiwan.
Unfortunately, her
visa isn’t up to date
anymore, so she
goes on the Public
Service native
feature to get a new
one.
7PM
An alert informs her that today is her nephew's
birthday. Xiaolei sends him a red envelope as a
gift. She also takes this opportunity to also
send one to her grandmother to thank her for
the last weekend's lunch.
9PM
Coming back home, Xiaolei posts pictures of her
diner on Moments, restricting access only to
her close friends.
WeRun’s notification informs her that she won
the daily contest by having done 23,000 steps.
It automatically donates 2 yuans to charity.

How did WeChat
become a way of life
in China?

“
Being a product creator is like being
in a relationship with the users.
Otherwise, it’s only a business
transaction. Product managers must
have big hearts”
Allen Zhang
founder and CEO of WeChat
Weibo post 2011
From customer
centricity to
customer
obsession
-

Red envelopes:
more than a
feature.
A tradition
reinvented.
-
It was really impressive! This year’s Pearl Harbor attack
was indeed beautifully planned and executed”
Jack Ma
Chairman of Alibaba Group
A few elements greatly boosted the user pick-up of
this new feature:
1/ Attaching a feature to a preexisting usage and
cultural context (numerology, red = lucky color)
2/ Specific features betting on gamification,
variable reward and group effect
3/ Promoting the feature among tight knit social
circles and then extend the use to more distant
circles like street merchants and online stores
Source: YCombinator
In 2014, WeChat digitalized the Red envelopes and shook up an old tradition deeply rooted in the Chinese
culture where people give each other red envelopes with money inside for anniversaries or other festive
occasions.
WeChat gifting during
Chinese New Year
“

WeChat used
every part of
the buffalo
-
WeChat completely went away from the desktop development mode and exploited all possibilities offered by
smartphones to build the first massive mobile-only app.
Native american hunters maximized the buffalo’s
potential. There was no waste as all the parts of
the animal was either used as nutrition or reused.
Designing a mobile-only service means making
the most of all the sensors and capabilities that a
smartphone can offer.
Sources: Connie Chan (a16z)
“Smartphone
is the third
hand for
humans”
Allen Zhang

Shaping new
national experience
standards:
QR code
-
The Quick Response system (QR code) became popular outside the automotive industry in Japan in 1994.
Massively promoted by WeChat from 2012, the QR code truly became the tipping point for China’s
online-to-offline frenzy.
Social interaction
People no longer have business cards,
they directly scan their QR Code to connect
Marketing
Good way for brands to interact with their
customers, promote official accounts and
collect relevant data
Payment
Simplification of payment transactions for both
customers and sellers: a cashless society
SCAN ME
QR codes scanned every day
with WeChat
Sources: YCombinator, MIT technology
Review, China Channel
Access to information
Sending web links or making online searches
have been replaced by QR codes
80 million
For Tencent’s CEO Pony Ma, a QR code is a “label of abundant online information, attached to the offline
world”. It has reshaped many aspects of the Chinese society:
$6,000Bn
Mobile payments generated
by WeChat Pay in 2017
Vs. $450Bn for Paypal
The entry point for PC internet is the search box.
The entry point for mobile internet is the QR code”
Allen Zhang
founder and CEO of WeChat, 2012
“

Shaping new
national
experience
standards:
‘Shake’
-
‘Shake’
GPS + Accelerometer + Bluetooth
At first, it was made for people to
randomly find a person to chat with.
‘Shake’ is one of WeChat’s
early features that has
become a characteristic
of the app.
→ The ‘Shake’ functionality is so successful that it has been completely
integrated in the Chinese society as a whole. People shake to get
information, coupons, special offers or free samples.
Afterwards, this
functionality
allowed users to
find nearby stores
and interact with
many connected
physical elements.
iBeacon
Device
Coupons
Payment Followers
Social
Sharing
Offline
Retails
Woman using WeChat Shake functionality
in Metro shop in Shanghai

WeChat
keeps
shaping
tomorrow’s
lifestyle
-
In the same way, Tencent moved from the PC-world to the mobile world, the future of WeChat is
likely to turn into an intelligent interaction medium. This move is part of the Tencent strategy to
expand into the industrial internet.
WeChat will soon introduce a
Siri-like digital assistant
named “Xiaowei” that will be
linked to a myriad of Tencent’s
services, as well as
mini-programs run by third
parties.
At the heart of intelligent
connected vehicles
As a personal home
assistant (like Alexa and
Google home)
It’s undeniable that at some point in the future we will stop
looking at this small screen in our pockets”
Matthew Brennan
China Channel
Integrated across all sorts
of connected devices (IOT)
“

A customer hires a product to do a job
-
In essence, WeChat is a digital Swiss Army knife, a
personal life assistant.
As a lifestyle tool, WeChat is here to help users
improve efficiency, rather than let users waste
time in its ecosystem.
For mini-programs, WeChat has adopted a designer
approach by reducing the time required to complete an
action.
People do not want a quarter-inch
drill, they want a quarter inch hole”
Theodore Levitt
Marketing professor
at Harvard Business School
Wallet is the
key feature
to build a
‘super app’
model
Seamlessly
integrated
ecosystem
of services
A unique
access point
One-click payment
solution
Source: Ben Thompson
“
Source: Ben Thompson

How did WeChat
succeed in addressing
every problem while
remaining consistent?

Enabling seamless
experiences by
shortening path
to services
-
• Go to an app store
• Download Mobike’s app
(cross fingers for internet connection)
• Delete apps or contents to have more space
• Open Mobike’s app
• Create a user account
• Login
• Add your credit card
• Scan the bike’s QR code
• Enjoy your ride
• Be billed
• Open WeChat
• Launch the mini-program
(or scan a QR code)
• Scan the bike’s QR code
• Enjoy your ride
• Be billed
10 min
Use the service
Mini-programs are basically an
app-store within an app which
transforms WeChat into a
mobile operating system.
It took Apple 6 years
to get 1 millions apps,
WeChat only needed 1,5 years
DAU of mini-programs
as of October 2018
10 sec
Use the service
In the West Meanwhile in China
Source: 31Ten
of the user traffic coming from
mini-programs, mostly through
P2P sharing

What I do on
What I do on
What I do on
Platforms like Facebook or Toutiao monitor the time spent on their services: the more users spend time on
the service, the more money they get through ads. As a consequence, their newsfeeds are AI-driven to
optimize the content and user retention.
Metrics / KPI Lever for growth
Scroll, scroll,
scroll...
Scroll,
scroll,
scroll...
Use and
go
Mean
Advertising is not
the only way to be
profitable
-
Efficiency is more than a
marketing positioning;
it is at the core of
WeChat KPIs.
WeChat thrives to stay a productivity tool with a unusual approach: newsfeed is a pure experience of
peer-to-peer sharing and recommendations (messages, pictures, official accounts, mini-programmes).
Maximize attention
and time spent
Artificial
intelligence
Not yet connected individuals
or companies.
Launch of new sticky features
Not yet connected individuals
or companies.
Launch of new sticky features
Not solved pain points for
individuals and companies.
Answer to new JTBD
Maximize attention
and time spent
Jobs done
Artificial
intelligence
UGC and
sharing

Within WeChat,
value created
is equally
distributed
-
WeChat redefines interactions on both B2C and B2B side and controls the UX provided by third party
players, in order to ensure long term growth of the whole ecosystem.
WeChat
Users Business
partners
An equilibrium to find in order
to preserve all the stakeholders:
The barycenter of value
“User’s social graph brings huge
potential benefits”
“Commercialization
should not contradict
user value and
experience”
“We don’t only want to make it a pure traffic
site, but also gradually come up with more
creative and interesting things out there”
WeChat is paying great
attention to its users and
incentivizes the
ecosystem to follow
design rules established
by Allen Zhang himself.
Source: Allen Zhang

Commercialization
should not
contradict user
value and
experience
-
Sources: Morgan Stanley, Fool,
China Tech Insights Report, Statista,
The Motley Fool
17%*
Payment
and cloud
WeChat shows only
2 ads per day
vs 1 ad every 10 posts on Facebook.
Ads from WeChat feed generate
93% less revenue
than Facebook’s daily active user.
18%*
Ad
* Of Tencent’s revenues
65%*
In-app items
WeChat
x Users
“Ads in the messaging
window was never a
viable option for us,
unlike our friends at
Google or other
companies.”
David Wallerstein
Tencent CXO
WeChat accounts for 70% of these
revenues, through mini-programs
and WeChat Pay.
Not pushing too much ads is a strategic decision to ensure WeChat is about usefulness and task
completion, and not another advertising platform.
WeChat is the backbone of Tencent
WeChat is like a distribution
platform giving access to a range of
Tencent services.

User’s social graph
brings huge
potential benefits
-
Sources: JD.com, Curiosity China,
Walk the Chat
A Spark Program to support third parties
A $15 million fund launched in 2016
WeChat
x Partners
WeChat aims at making
business partners better
at delivering their user
experience so that
end-customers feel happy
to stay in WeChat’s
ecosystem.
Efficient tools to manage communities on WeChat
A social CRM based on official accounts & mini programs
$1,500 gift packages given
to boost growth of small
service providers.
The Spark Program will support service providers in
terms of operating, material and technical expenses.
The incentive plan covers a wide variety of industries
including catering, retail, tourism, or transportation.
Xiangqi Youxuan
Xiangqi Youxuan’s e-commerce mini program is
operated by a small team of only 22 people.
On their first participation to Single Day (11/11),
and thanks to WeChat’s CRM tools, they reached
1.5 billion RMB sales (around $220M)!
WeChat is a very complete CRM tool.
It offers countless possibilities for brands to
manage communities and enhance engagement.
User data can be collected are synchronised
easily on WeChat Analytics platform.

A creativity-centric
model that has
changed the
language of
product marketing
-
WeChat works on virality. To emerge, a brand, a service or a product must be shared with friends.
Due to the fierce competition and the restrictive amount of ads on WeChat, brands must show high
level of creativity to create engagement, especially in retail and luxury.
Sources: Marketing in Asia, Jing Daily
Coffee box
Consumers could design and operate their own
online coffee shop and sell coffee to their friends.
The coffee was then delivered right to the friend’s
doorsteps.
Breitling
In a gamified H5 environment, users could receive a
phone call from Daniel Wu, which lead them to
explore the new brand message and signature
products. This generated a high social buzz with more
core fans and engagements on the organic content.
Users x
Partners

WeChat
captures
value where
it creates it
-
Sources: Quartz
Tencent has set in place a balanced business model to increase user base,
as well as business acquisitions and retentions:
WeChat
users
Third
parties
Capturing user’s
qualified data
enables WeChat to
attract third parties
(services + ads)
Third parties bring
traffic and relevance
for WeChat. They
develop services that
boost the use of
WeChat Pay
Third parties can
connect with more
than 1 billion qualified
users logged in with
their bank account
Users have access to
an increasingly offer
of useful and
seamlessly integrated
services
Value
Capture
Value
Creation

WeChat, the perfect business springboard
-
Chinese group-buying platform Pinduoduo uses WeChat’s traction to grow. It’s the fastest growing e-commerce business in a highly competitive
sector thanks to mini-programs: between March 2017 and August 2018, Pinduoduo MAU have increased from 3% to 31% of Alibaba MAU.
The company was founded in September 2015 and went public at a $24B valuation.
Pinduoduo is a member of WeChat’s holding company (18,5% of PDD’s stakes).
Source: WalkTheChat
“By rolling so many functions
into one single app, WeChat has
changed the definition of
virality. It’s no longer images or
tweets, or videos that can go
viral, it can be a business.
The aligned incentives of
Tencent mean all businesses get
the potential benefits of a user’s
social graph.”
Viktor Makarsky
Entrepreneur, CEO of Menu3
Users can invite friends to
use Pinduoduo in exchange
for cash.
Once enabled,
payments can be done
without password
Pinduoduo activates
by default “automatic
payments”
Pink is the price to buy directly, red is
the price to group buy?

How did Tencent
use WeChat as a
playground to set its
domination?

Share your
audience
-
Through APIs, companies
can give external businesses
access to dedicated
functionalities and assets.
WeChat goes beyond: it
shares its existing user
base with brands and
businesses.
In the internet economy, what matters
is direct customer connections.
The objective of Tencent is not to take
control over companies but to take
control of the distribution of the
service.
This strategy is a way to aggregate even
more traffic within its app, in order to
become a one-stop shop for any service.
This is the secret of so many
chinese companies:
sharing their user base and
sharing their traffic to retain
mind share and relevance”
Connie Chan
Partner at a16z
“
Sources: Ben Thompson

Pick your
champions
-
WeChat is a framework in which businesses can grow and prosper
WeChat picks up the best service providers and adds them into available slots on its wallet. Being directly
available on WeChat's wallet is like being featured on the front page of a magazine: there are Wallet's featured
services... and the others.
Online shopping - collaboration with
JD.com (marketplace, takes 15% of
shares), Mogujie (women's fashion),
Vipshop (flash sale) …
Use a shared bike -
collaboration with Mobike
(raised $600 million in a round
led by Tencent)
Find information and read review about
local small business - collaboration with
Meituan Dianping (Tencent owns a fifth
of Meituan)
Book railway tickets and flights:
Collaboration with the national railway
company
Ride hailing - collaboration with Didi
(in 2014, after investing $115M)
Buy movie and theater tickets -
collaboration with Panda movie
Book hotels - collaboration with
LY.com and eLong.com (16% in 2011)
Due to its position – meeting
point between users and
suppliers – WeChat is in a
privileged position to spot
promising business and make
the best of them succeed.
Sources: FABERNOVEL’s analysis

Ecosystem
growth is the
measure of real
leaders…
and their best
weapons
-
Tencent is not only service provider, it is an ecosystem builder that re-organises competition: Tencent
picks out excellent startups and fosters these companies as its ‘descendants’* to ensure its long-term
domination over competition.*
Source: Bernstein Research
*Quote: Yingzi Yuan
Tencent creates value by connecting to
its ecosystem the startups that it backs.”
Nicolas Du Cray
Partner at Cathay Innovation
# of unicorns backed
Source: CB insights
The Softbank of China
65B$ have been invested by
Tencent in 350 companies
since 2012.
Thanks to these investments,
WeChat is able to better fight
competitors, such as Alibaba,
which wages war against
WeChat for traffic and
customer acquisition.
“
Source: Jiguang data (jiguang.cn) WalktheChat Analysis
28
25
11
0
1
1
5

“
Chinese and Western companies tend to
have a dramatically different approach to
expansion. In a few words: Western
companies build products, while Chinese
companies build ecosystems.”
Thomas Graziani
Co-founder, WalktheChat
GAFA defend
their castle
whereas
BATX expand
on many
verticals
-
The purpose of Chinese
investments is to build a
system of allegiance to
the group.
After receiving investment,
the company will have to
ingrate with the ecosystem
of the group and reject the
competing ecosystem.
Sources: WalkTheChat

Voice assistants are killer devices for many brands, particularly for retailers.
If the technology is important to attract users and developers, the main difference lies on the integrated
ecosystem that the users will have access to.
“Digital China is
mostly a team sport”
Jeffrey Towson
Expert on Digital China and
Digital Competition
Your ecosystem
is your value
-

Foreign expansion is a hard nut to crack
-
Strong competitors
already in place
Entering mature markets is difficult,
especially in the case of an instant
messaging app, where the network
effect plays a major role.
Weakened value proposition abroad
Introducing new markets without building the
ecosystem upstream, leads to a decrease in the
attractiveness of the app. Users didn’t have access
to the Wallet and all functionalities that make the
value of the Super App.
Different Culture
WeChat is very Chinese-centric
product. Efforts to adapt to local
cultures have not been sufficient,
creating a discrepancy between users’
expectations and Wechat offer.
A global marketing campaign was launched in 2013, introducing a lighter
version of Wechat in 15 countries.
It failed for 3 reasons:
As American companies have
learned in China, products that
work well at home sometimes
get lost in translation.”
Emily Parker
MIT
“

WeChat reaches a growth cap in China and competitors are emerging
-
Social
Byte Dance
Content platform launched in
2016, it now has more than
500m users worldwide
Payment
Alipay
54% market share in China, vs.
40% for WeChat Pay
Competitors are coming from everywhereWeChat already have
most of Chinese users
92%
penetration*
Super App
Meituan-Dianping
Launched as a food-delivery
platform, it’s diversifying its
services
*In Tier-1 cities
Source: SCMP

What strategies
WeChat chose to
expand globally?

Replicating
the entire
model in
relevant
markets
-
Grow
end-user
base
Grow B2B
partnerships
Launch WeChat
Messaging only
Connect businesses
and users through
WeChat Pay
WeChat
ecosystem
Time
By conquering new markets this way, WeChat is able to extend its user base:
93%
of penetration rate in Malaysia*
WeChat has been launched in 2012 as an Instant Messaging app. Since the activation of WeChat Pay in 2018,
the value proposition is similar than in China.
# of Users
# of
Merchants
Critical mass
South-East Asian countries
are particularly
WeChat-compatible
markets.
*WeChat active users/ total internet users
Source: FABERNOVEL’s estimation

Capitalizing
on Chinese
diaspora to
increase
revenue
through
WeChat Pay
-
WeChat is not looking to
replicate the same business
model in the West.
WeChat has already reached the threshold of 1 billion users.
WeChat’s goal is not to expand the number of users now, we have to think about
providing services for existing users.”
Allen Zhang
Founder and CEO of WeChat
Instead, its focus will be on bringing international brands to its platform to sell more to the Chinese,
alongside services for Chinese travellers abroad.
Annual overseas visits Total outbound trip expenditure
Billion, $
“Source: Chinese Tourist News

WeChat Pay
is WeChat’s
beachhead
-
49 countries
where WeChat Pay is available
18 currencies
Where can you pay with WeChat Pay in 2018?

What are you
waiting for?
For a private presentation, please contact: client_office@fabernovel.com
For media inquiries, please contact: medias@fabernovel.com

Audrey Da Cruz
Benoît Talabot
Joachim Martin
Marina Dislich
Zineb Akharraz Torikian
Paris-based team
Nicolas Cabanes
Guillaume Gombert
Valentin Le Blan
Tom Morisse
Shanghai-based team
Rachel Daydou
Xiaolei Gu
Patrice Nordey
Jingjing Shen
Research
Communication Design
Special thanks to industry experts
Matthew Brennan
Founder of China Channel
Nicolas Du Cray
Partner at Cathay Capital

WeChat, the shape of the connected China

More Related Content

What's hot (20)

Similar to WeChat, the shape of the connected China (20)

More from Fabernovel (20)

Recently uploaded (20)

WeChat, the shape of the connected China