M-commerce battle royal brews in China June 02 2014
Tencent adds merchant capabilities to WeChat, upping the ante against Alibaba, and is eyeing international markets
Tencent has added the ability to sell buy and sell goods online to its WeChat instant messaging application (Weixin in China), which has about 396m monthly active users, with about a quarter of its usage going on abroad. The new functionality takes Tencent directly up against Chinese retail giant Alibaba, which has been building a full mobile platform and is set to conduct an IPO in the US soon.
Tencent has added an in-app function for holders of public Weixin accounts, allowing the users to upload photos of merchandise, manage orders and talk to buyers. Shoppers at the 'little WeChat stores' can use Tencent's third party payments system, Weixin Payment.
Like all messaging and social media providers, Tencent is struggling with the best ways to monetize its huge user base, and is experimenting with revenues from advertising, gaming and shopping services. However, Chinese media and some users have criticized the way WeChat is now running ads and promotions, with the People's Daily newspaper complaining the platform is no longer "pure", although Tencent confines such commercial activities to the Moments stream within its application.
"It's great in terms of moving forward with their monetization plans; it's another revenue stream," Stephen Yang, an analyst at Sun Hung Kai Financial told Bloomberg. "Hopefully this will become another profit center for them."
Tencent is expected to generate $1.1bn in revenues from WeChat this year, much of it mobile, but it says it will limit its m-commerce efforts to China for the time being. Poshu Yeung, VP of the firm's international business group, has hinted at taking the payments system to other countries, but recently told TheNextWeb that the international market is not yet ready for full monetization. The priority for now will be to build user numbers. "No company tries to make money too early also. If you look at Google, Facebook, they didn't make money for the first 6-8 years. It's not like we don't want to make money but we just don't think it's the right time," he said. "There's no reason why we can't do it outside of China, but on the other hand we also need to look at how mature the commerce business in different countries is."
In emerging markets, the barrier is often a lack of payments infrastructure such as bank cards, while the US would be "the hardest market to penetrate" because of the established giants there. Tencent is running focus groups to understand US consumers' needs more clearly but says the IM market is fragmented, and of course, Tencent does not have an installed base of own-branded handsets, as it does at home.
For its part, Alibaba is coming from the opposite direction - starting with ecommerce and moving into social media and IM (it recently led a $280m investment round into chat application Tango, for instance).