Facebook Shift Nods to Example of Chinese Super-app WeChat

Date : 03/07/2019 @ 3:52PM
Source : Dow Jones News
Stock : Tencent Holding Ltd. (PC) (TCEHY)
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Facebook Shift Nods to Example of Chinese Super-app WeChat

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By Shan Li 

BEIJING -- Facebook Inc.'s latest shift toward private messaging, payments and e-commerce echoes the footsteps of WeChat, China's social networking super app that many Chinese find indispensable.

After Facebook Chief Executive Mark Zuckerberg said in a blog post that the social media powerhouse that encourages public sharing sees its future in encrypted messaging, payments and other services, the similarities were striking to many Chinese.

"Isn't this just WeChat?" one user noted on Weibo, China's answer to Twitter.

The path to a super-app wouldn't be as smooth for Facebook as it was for WeChat, which was sheltered from competition in a market hungry for its services, and doesn't provide the level of privacy that many users of a Facebook app would likely demand.

But for wired Chinese -- and tech-sector analysts -- the reason for Facebook's shift is easy to understand. Developed by Tencent Holdings Ltd. WeChat has evolved from a simple messaging service into an app where users can shop, pay, order food, buy movie tickets and make restaurant reservations and doctor's appointments without leaving the platform.

WeChat counts over one billion users. Tencent doesn't break out financial figures specifically for WeChat and gaming remains its biggest source of revenues. In its last financial quarter, the company recorded year-over-year revenue growth of over 60% in social advertising, payment services and other businesses related to WeChat.

It has helped turn the Shenzhen-based company into one of China's biggest, most influential companies, with investments in industries including retail, health care, transportation and education.

Facebook is "very aware of how Tencent has been able to integrate messaging and payment and e-commerce and all of these mini-apps into one platform," said Ben Cavender, a senior analyst at China Market Research Group.

Facebook executives have spoken admiringly of WeChat. David Marcus, Facebook's former head of Messenger, has called out apps developed in Asia, including WeChat, as trailblazers in offering services on messaging platforms. Tencent didn't respond to a request for comment about Facebook's strategy shift.

By pushing into services, Facebook is trying to find other ways of making money beyond advertising, which accounts for about 98% of its revenue.

"They are looking at future growth," said Mr. Cavender, "seeing that this is one option that has clearly worked."

A huge draw of WeChat is its mobile payment system, WeChat Pay, which enables users to pay both virtually and in physical stores without cash or credit cards by simply scanning a QR code. People can also transfer money to each other through the app.

Its popularity has drawn a huge variety of businesses, many of which rely on WeChat for the bulk of their customers, according to analysts. Chinese startups such as Pinduoduo Inc., an e-commerce company that offers group discounts on consumer goods, have piggybacked off the social network's popularity to achieve unicorn status.

Tencent "has moved into markets like retail and education and health care -- and payments is their foot in the door in all of these industries," said Matthew Brennan, a China tech consultant and writer. "When you have embedded digital payments into your system, you can build out and offer other services."

Unlike Facebook, which is promising encrypted messaging, WeChat's messages aren't securely encrypted, and the service is seen by cybersecurity analysts as unsafe. Tencent denies that and says it protects users' privacy.

Tencent is also required by law to keep information on users and to police content for material the government deems objectionable.

If Facebook aims to develop a super-app on par with WeChat, it will face a tougher road.

WeChat grew up within the protective confines of China, where the government has sheltered its homegrown champions by warding off foreign rivals, sometimes by blocking them outright. Facebook, Messenger, WhatsApp and Instagram, for example, are all inaccessible in China without a virtual private network, or VPN.

People in China were also open to adopting mobile payments. Chinese banks are notoriously known for poor customer service, while credit cards never caught on in a big way. And Tencent's aggressive string of acquisitions means it owns a stake in many of the businesses that offer services through WeChat, such as lifestyle platform Meituan Dianping and e-commerce giant JD.com.

Facebook, on the other hand, will have to ink deals with individual businesses to offer services via its platforms. It may also need to convince Americans and others attached to their credit cards to try paying with their smartphones instead.

Its past experiments into digital payments has had mixed success. Messenger offers a payment function where users can send money to contacts, but it has lagged behind rivals such as Venmo or Apple Pay, analysts said.

"Tencent is working in its home market," said Mr. Brennan, the consultant. "It's just a messier picture compared to rolling out something like payments to a global audience."

--Xiao Xiao contributed to this article.

Write to Shan Li at shan.li@wsj.com


(END) Dow Jones Newswires

March 07, 2019 10:37 ET (15:37 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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