Opposing Strategies in the Mobile Messaging Wars: Atomization vs Centralization
In a recent article, my GGV Capital partner Glenn Solomon and I analyzed WeChat’s use in the business context as it compares to Slack. This article will look at how consumers use WeChat outside of work.
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On January 9, 2017, techies worldwide will celebrate the iPhone’s 10th anniversary. No doubt, Steve Jobs and his colleagues supercharged the mobile revolution. That revolution, however, has taken different shapes and forms in different parts of the world. Atomization, largely popular in the west, has delighted consumers with native mobile applications that provide experiences often in a silo. Mobile experiences have been boiled down to the atomic unit, whereas in places like China, the power of WeChat demonstrates what is possible with Centralization, a rival strategy in which a centralized app paradigm creates an ecosystem of services and a seamless, in-app experience — similar to a mobile operating system. WeChat was launched in 2011 and is owned by internet giant Tencent. As large global companies such as Facebook (with its popular Messenger app) and Tencent enter their next phases, what interaction model will prove best for consumers, app developers, and businesses?
Over the last decade, Facebook’s rise and ability to transition to a mobile world has paid off; it’s now one of the most important companies in the world. In the Facebook mobile universe, users can connect with friends on properties like Instagram, Whatsapp, or the core Facebook app itself. Of course, they can use Facebook’s standalone Messenger app as well (FBM). Given how the majority of western mobile apps have been designed to date, consumers have grown conditioned to using single-purpose apps to carry out a variety of tasks and services. To switch between apps, consumers will move from one app silo to another. Often, these transitions are not seamless. Technologies like deep linking have emerged to help soften the transition, but users likely know they’re being transitioned in and out of these apps. No one knows this better than Facebook, which took the hard-line decision of breaking out its popular Messenger app and forcing users to download it, restricting access from the core Facebook app. At the time, this was seen as an aggressive move, but Facebook has tremendous market power. While the tactic seems to have worked, The Information recently explored how Facebook is struggling to get users to adopt the interaction model of deep-linking between other apps.
WeChat has taken a different approach. By now, you probably have one or more friends who use WeChat on a daily basis — or should we say, many multiple times a day. For our friends in China and throughout the WeChat diaspora worldwide, WeChat is far more than a messaging app; it’s a communication hub where people chat with friends, and also interact with businesses, as well as order goods and services, read and comment on world events, and conduct much of daily life — much like Facebook users do. As the Economist recently highlighted, “WeChat shows the way to social media’s future,” and further stated that, “People who divide their time between China and the West complain that leaving WeChat behind is akin to stepping back in time.” To be sure the product designers at WeChat have creatively solved some of the issues users face in a world of clumsy deep-linking, siloed app frameworks, broken app store models, and outdated input methods.
WeChat’s Stickiness
Research shows approximately 63% of Americans use one to five apps daily, and nearly 30% use six to 10 apps per day.This stands in stark contrast to China, where more than 700 million people use one app — WeChat — for nearly everything. As our colleague Connie Chan of Andreessen Horowitz recently explained, WeChat is a one-stop app; from the moment people wake up until they go to bed, they’re connected to WeChat, using it for every aspect of their daily lives. Some 94% of WeChat users use the app daily, and 61% of users open the app at least 10 times a day. In fact, over one-third of WeChat users open the app at least 30 times per day.
For a clearer picture of just how sticky the WeChat experience is, we asked one of our young associates in GGV’s Beijing office to outline her typical day on WeChat. Below, you can see how she moves through the app from 7:00 am to 10:00 pm.
For a more detailed look at a day-in-the-life of a WeChat user, we examined six areas where WeChat offers a more unified experience to keep users in the app and keep them coming back.
1. Communications: Instead of simple person-to-person or group messaging like Facebook Messenger, WeChat combines the functionality of Moments (photo syncing) with messaging. When someone you’re connected to posts a moment — a video, link, or photo — you can instantly message that person from within that Moment. In the US, most people would use Facebook or Instagram to post and view personal photos, and Twitter to post and read updates, but then toggle over to iMessage, WhatsApp, or Facebook Messenger to send personal messages to friends about their posts.
2. Media: WeChat has over 10 million Official Accounts, which brands, personalities, or journalists can use to broadcast news, information, ads, or promotions. Any WeChat user can follow and browse these public accounts, reading media sites that interest them or interacting with brands or celebrities they like. Over 25% of the official accounts fall under the “general news” category, catapulting WeChat into the #1 destination for people to find and read news daily. Three-quarters of WeChat users follow public accounts to get news and information. WeChat’s media functionality is very similar to the “stories” functionality on Snapchat and Instagram (and was first introduced in China a few years earlier). WeChat public accounts were inspired by Twitter and Sina Weibo, and are widely used by the media, writers, celebrities, brands and designers to publish content to followers.
3. Transportation: One of the most popular ways people use WeChat is to manage transportation, from taxis and flights to train tickets. Through partnerships with third-party providers like Didi Chuxing, the largest taxi and ride-hailing app in China, and train and flight booking services, WeChat offers users the ability to find, book, and pay for almost all of their transportation needs directly in the app. WeChat users can also book hotels and home-stays. To do all this in the U.S., a consumer would have to launch a handful of different apps, such as Uber, Kayak, HotelTonight, and Airbnb.
4. E-commerce: WeChat is one of the largest e-commerce platforms in the world, on pace to transact $556 billion in 2016 across WeChat Payment (excluding transactions for popular services such as paying for taxis on Didi, ordering from restaurants on Meituan, and consuming content, music and video games.) Users can shop on large online retail sites such as JD.com or many smaller merchants’ microsites, all directly within WeChat. Because over 200 million WeChat users have linked their credit cards to the app, it’s easy to pay for goods directly within WeChat. But WeChat users don’t just buy goods on the platform, they also order and pay for meal delivery, movie tickets, and much more. For most Americans, making purchases like these would at least entail visiting Amazon’s mobile website, and opening the Seamless, Yelp and Fandango apps. Plus, WeChat also enables users to do social shopping — discovering items that friends or influencers have recommended and purchasing them straight away within WeChat.
5. Payment: The Economist recently wrote that, “[payment] is the best example yet of how China is shaping the future of the mobile internet for consumers everywhere. WeChat has largely replaced cash for many Chinese consumers. Relying on QR codes, they use WeChat for peer-to-peer money transfers between friends and to pay for goods at over 200,000 local stores. Sending and receiving money and paying for goods at stores are the fourth and fifth most popular uses of WeChat, after browsing Moments, posting content, and reading news on public accounts. More than two-thirds of WeChat users spend more than 100 RMB (~$15) per month on such payments. In the U.S., people make peer-to-peer payments using apps like Venmo and Square Cash and pay for goods in stores using apps like Apple Pay and Google Wallet. However, uptake of these apps has been slow and the vast majority of Americans still use cash and credit cards for payments.
6. Virtual Items: Another thing WeChat users love to do is buy virtual goods such as stickers and game tokens. A quarter of WeChat users regularly collect and share stickers and emojis, and some of these cost money to acquire. It’s easy to buy them directly within WeChat for a few cents or a dollar, or to buy them to gift to a friend. There are several services letting users buy premium emojis and stickers in the U.S. like Emoji+ and Bitmoji but you have to leave Facebook Messenger to get them, and it can then be tricky to import them into Messenger for sharing. Of course, Americans are used to buying game tokens and gems inside of games, but WeChat users play games directly in the app, and make purchases of virtual items there, too.
WeChat: Optimizing For Conversion and Retention — the Next Mobile OS?
With Messenger, Facebook continues to use western mobile app conventions, though as the next battlegrounds for mobile mindshare emerge, perhaps the success of WeChat holds a clue to the future of mobile app ecosystems and seamless, in-app user experiences. Assume for a moment that Facebook Messenger could transform into a WeChat-like experience. Even though this move would be seen as a shot against other single-purpose mobile apps, and although Facebook properties combined certainly have huge daily user audiences, the WeChat experience demonstrates the retention and stickiness that comes from presenting consumers with a single-platform ecosystem.
The concept of siloed mobile apps is deeply ingrained in the western consciousness. Fred Wilson, wrote on his popular blog AVC that more and more commerce companies should work on deep-linking architectures to have a chance to get traffic from mobile social networks. Yet, the current user experience of deep-linking demonstrates the cost is retention and conversion. Facebook has invested heavily in its Messenger app, which now boasts 1 billion active monthly users, purchased the world’s most popular communications app, WhatsApp, and also supports messaging through its Instagram property. Alternatively, Apple’s iMessage is the most-used application on iOS, and a richer version was recently rolled out as part of iOS 10. Both lack the single platform ecosystem that drives the kind of daily-life integration and user experience that fans of WeChat enjoy. Facebook Messenger is great at connecting Facebook friends directly within the larger Facebook platform. But it has a long way to go to become the WeChat of America.
As investors in the consumer mobile space, we are closely watching new growth areas in messaging. We think WeChat could evolve into a next generation operating system for apps in China. Therefore we eagerly await Facebook’s next move with FBM. In a world where FBM could become a more unified experience and ecosystem, the windfalls from consumer retention and increased conversion could revolutionize mobile consumer commerce, and that is exciting to envision.
Hans Tung is a Managing Partner with GGV Capital. Some of his recent investments include Wish, Musical.ly, Xiaohongshu (Red), AirBnB, OfferUp, Slack, Operator, Poshmark and Prynt. Hans was previously a seed investor and board member of Xiaomi. Follow Hans on Twitter (@Hanstung).
Glenn Solomon is a Managing Partner with GGV Capital. Some of his recent investments include BitSight, Zendesk, Square, Pandora, Successfactors, Nimble Storage, AirBnB, Slack, Opendoor, Domo, HashiCorp and AlienVault. Follow Glenn on Twitter (@glennsolomon) and on his personal blog.
As a disclosure, please note GGV Capital is an investor in some of the companies mentioned in this article, such as Airbnb, HotelTonight, and Didi Chuxing, among others. A special thanks for thoughts on this article to Semil Shah, a Venture Partner with GGV and an active seed investor and technology writer, as well as Jason Costa, an EIR with GGV, who recently joined after experiences as a Product Manager with Pinterest, Twitter, Google, and Facebook.
