How Can We Monetize Messaging Apps?
Business Strategies We Can Learn From WeChat’s Revenue Streams
Note: This article assumes you to have basic knowledge of WeChat; for WeChat 101 click here
WeChat is the messaging app everyone in China uses. It’s inexplicably interwoven into the lives of consumers and businesses alike. It boasts 468mm MAUs (as of Q3 2014), only third to WhatsApp’s 600mm MAUs and Facebook Messenger’s 500mm MAUs. But beyond the simple ability to send and receive multi-media messages, it can help you hail a taxi, book a dinner reservation, transfer payments, and more. A key differentiation from other messaging apps is WeChat Moments, a Facebook-like news feed where users can share pictures, videos and content, with connected friends. WeChat has built a massive ecosystem of apps and business applications around these two features: users’ ability to chat with one another one-on-one and share content one-to-all (friends only). Simply put, WeChat is WhatsApp on steroids; it’s the Apple of messaging apps; it’s every Western messaging app’s wet dream.
Glimpsing into WeChat’s empire can give Western messaging apps ideas on potential revenue channels. Let’s explore some less apparent WeChat revenue streams outside of 3rd party apps such as DianPing (Yelp/OpenTable hybrid) and DiDi DaChe (Taxi-hailing).
Note: I am not suggesting localization of features for the Western market
Non-3rd Party App Revenue Streams
WeChat Advertising (2015): In January 2015, WeChat began testing promoted and sponsored ads, similar to those on Facebook, on its WeChat moments. Because WeChat’s social network is more clustered due to its one-to-one nature, shared content have stronger word-of-mouth appeal and draw deeper connections. Advertising opens up WeChat into a broadcast platform, enabling brands to target any user, rather than only those who follow their official accounts. WeChat is predicted to generate RMB10bn (~$1.6bn) in annual revenue just on WeChat advertising alone in the next 12–18 months, according to Pacific Crest.
WeChat Account for Enterprise (rumored 2015): WeChat for business…or basically Yammer. This presents a huge market opportunity because everyone in China knows how to use WeChat and many are already using WeChat for business communication purposes. A natural extension would require WeChat to simply tweak the interface to better suit business needs.
Wi-Fi solution for public accounts (Nov 2014): Offers Wi-fi solution for brick-and-mortar stores, connecting WiFi service providers, offline merchants and customers. What this means is as a WeChat user, you will be able to enjoy free WiFi when you enter corresponding brick-and-mortar stores. This enables these stores to conduct O2O campaigns to onboard customers and collect data on visitors, as well as send alerts to nearby customers (Apple iBeacon, anyone?).
Open API (Nov 2014): WeChat opened its API to connect official accounts and mobile apps, enabling developers to add an entry point in their mobile apps to connected official accounts. This seamless connection will help WeChat attract more users for its other services.
WeChat 6.0 (Sep 2014): Vine-like video feature called Sight and Passbook-style wallet. With Sight, you’re limited to 6s econd videos; if it is sent as a message, it autoplays like a GIF. Sight enables creative user-generated content, as GIFs and emoticons are already wildly popular on WeChat. Wallet further consolidates and organizes revenue streams — movie tickets, train and plane tickets, etc. into one compartment on the app.
Sougou-WeChat Search (Jun 2014): This exclusive JV enabled WeChat articles and public accounts to become searchable on Sogou Search, creating another screen and medium for WeChat content consumption. Additional features in version 2.0 include article recommendations, trending topics, etc. This adds another avenue for ad revenue generation as well as data mining implications.
- Why this is important: Chinese content organizations are compelled to republish existing content just for WeChat audience, to enable native-browsing experience, rather than linking outside of the WeChat platform. Most organizations comply because user base aside, WeChat’s publishing system offers data analytics, and its Moment sharing platform enables strong virality.
Mobile Store Platform (May 2014): Launched in-app mobile store platform, WeChat Little Store, for official accounts integrated with WeChat Payment. Despite the UI and UX challenges, companies are using it because — surprise, Taobao and Tmall (owned by competitor Alibaba) links are banned.
- Businesses are more willing to use WeChat’s platform as a mobile ecommerce platform because WeChat Payment is widely adopted, convenient, and trusted. For WeChat, these stores will be operated by third parties instead of centrally.
WeChat Payment launch (Mar 2014): Launch of WeChat Payment, the mobile payment solution within WeChat. Businesses need to first apply for a WeChat Service Account, where features can be integrated within APIs and then WeChat Payment. Losses are insured by The People’s Insurance Company of China. WeChat is creating a mobile-based ecommerce ecosystem to capitalize on its user base and compete against Alibaba.
- Ecommerce is a hobby in China and WeChat wants to drive users away from desktop Taobao/Tmall and toward its in-app stores
- WeChat’s initial venture into mobile commerce was in summer 2013, when it added payments for mobile games and stickers. Over time, it made paying for premium goods a habit within the mobile experience. Mobile commerce is the logical next step.
- Mar 2014: Fear of fraud and lessened control on the finance industry lead China to ban online payments made using QR codes (O2O in-person payments) and virtual credit cards. Normal ecommerce payments were unaffected.
WeChat version 5.2 (Feb 2014): Added a direct link to a LinkedIn on the profile page, location sharing (realtime), universal search across WeChat data, group chat mentions, and improved image browsing. For Chinese users: revamped bank cards and added a new voice-to-text feature. The features above all add additional dimensions to user data.
The Beast from the East
What began as a seamless messaging app has grown into a walled garden of apps, servicing all needs of the user from transferring payments to mobile ecommerce. WeChat is evolving into a Swiss army-knife and generating tons of revenue along the way. Wondering why messaging apps in the West haven’t implemented these revenue models is easier said than done. But analyzing what revenue models are available and works on mobile via WeChat could help messaging apps in the West think about their own revenue-generating capabilities.