Tencent’s WeChat vs. Facebook Messenger

(or, How Slack can become an enterprise messaging platform)

Connie Chan at a16z recently published an in-depth analysis of Tencent’s WeChat. Tencent (a Chinese media & internet holding company) launched WeChat in 2011 and today, it’s one of the largest standalone messaging app with nearly 550 million MAUs. Not only is its reach and scale impressive, WeChat is also a pioneer in the mobile space due to the high ARPU it has been able to extract from its user base. WeChat’s monetization strategy has led it to become both a platform for 3rd party application (dubbed “official accounts” and have access to exclusive APIs) and a portal for third-party services (for which WeChat acts as a mobile wallet).

Has WeChat paved the way for Facebook?

In March of this year, Facebook announced an ambitious initiative for Messenger — a platform strategy that would allow 1) developers to easily build apps that integrate with Messenger and thereby gain access to Messenger’s 600M users and 2) businesses to communicate more readily with their customers and thereby reducing the need for e-mail communication. Clearly, Facebook is looking to follow in WeChat’s footsteps and make Messenger more than just a messaging app.

However, the jury is still out on how well the Messenger Platform has been scaling. There are some indication that growth could be struggling, particularly as Facebook has already begun eyeing games as a new category of apps it wants to integrate with Messenger. Part of the reason for slow adoption may also be due to the consumer’s difficulty in discovering apps themselves on the Messenger platform.

According to data reviewed by The Information, […] about 5% of people who saw an app-originating message on Messenger went on to install the app via the link that appears below the message.

Why hasn’t Messenger taken off as a platform?

First, from a macro perspective, there are a few structural reasons why mobile platforms and portals function better in Asia:

  • High-speed wireless access is the norm in many Asian urban centers while Americans are still struggling to find free WiFi at their local coffee shop. This increased connectivity allows apps to be platforms without sacrificing user experience. American developers have flocked to offering native app experiences specifically to reduce lag in the user experience, as processing power often comes more readily than wireless bandwidth.
  • Asian consumers have embraced the phablet, which gives mobile app developers a lot of flexibility in terms of adding more UI elements to one app. Given the American user’s proclivity for regular-sized phones and more streamlined UI, it is more difficult to build a complex mobile portal for the American audience.

Second, from a micro perspective, WeChat’s platform also offers several key value propositions to developers that Messenger simply does not:

  • WeChat offers developers instant access to not only users, but also their highly-sensitive user data, including payment information, mailing address, GPS location, etc. While Messenger promises a large user base, it doesn’t yet have payment and address information which would prove invaluable to apps with in-app purchases.
  • WeChat’s platform also saves developer time and resources in not having to build a full stand-alone native mobile application. This is a non-trivial benefit particularly in light of high Android fragmentation. However, when attempting to add a third-party app to Facebook Messenger, the user still has to download the third-party standalone mobile app from the app store. Thus, a developer on the Messenger platform still needs build and ship both iOS and Android native apps.
  • To encourage SMB’s and develops to keep their business on WeChat, the company also offers completely free and highly sophisticated CRM and marketing tools. Not only does this offer a cost saving to the developer, but it also enables the developer to fully leverage their access to the WeChat user base. As far as I know, Messenger has not yet developed such marketing tools.

What can WeChat and Messenger teach us about Slack?

It would be unfair to expect Slack to grow as quickly as Messenger and WeChat — B2C messaging platforms have widespread and very strong network effects, while a B2B2C platform like Slack benefits primarily from contained, intra-company network effects. Slack’s business model primarily relies on a monthly subscription fee per user, and not on increasing ARPU by taking a piece of revenue from third-party applications. However, there are still a few lessons on platform strategy that Slack can learn from these global consumer messaging applications:

Localization, Localization, Localization: It’s clear that consumer behavior and preferences differ by region, and as a “consumerized” enterprise product, Slack would need to localize in more ways than just translation and payment processing. Slack needs to think about how knowledge workers in different regions of the world operate and tailor their platform to suit their needs.

Corporate Development with a Mission: Part of WeChat’s success is owed to Tencent’s backing, both in terms of resources and capital. As Connie Chan explains:

Most of the companies highlighted in the WeChat Wallet portal have taken investment dollars from Tencent, or were launched by them. This might explain why other Chinese internet giants with similar distribution power (Alibaba, Baidu, Qihoo360, and Xiaomi) have all been doubling down on early stage investments and going head-to-head with China’s top VC firms.

It may be helpful for Slack to think about corporate development as a way to seed their platform with key applications, and/or build more tight-knit relationships with third-party developers. It is essential for Slack to think about being true partners to their key integration partners.

From Messaging to Marketplace: Communication is important for both consumer and enterprise users, and just as how WeChat has grown from strictly chat to offering a lifestyle marketplace, Slack has the potential to move from messaging to a marketplace for the enterprise. Since so much of enterprise workflow revolves around communication and collaboration, it is a natural evolution for Slack to become a “Work OS” and offer third-party applications on top of their communication layer and participate in revenue sharing with those developers.

Slack has shown incredible growth to date, largely due to its product usability and ease of adoption within an organization. While Slack’s enterprise messaging software is indeed best-in-class, there is still so much more it could do for their enterprise customers. The holy grail for software and internet startups is crossing the chasm from “application” to “platform” — Slack is well-positioned to make that leap.