Many popular social-media apps are very similar in many ways. WhatsApp has recently been purchased by Facebook for $19 billion, offering a messaging service free of ads and games. In China as the government censors have blocked most international social-media and messaging services, like Twitter, Facebook, YouTube, people have created their own unique tech eco-system. As in the case of the China-based competitor WeChat, owned by Internet Company Tencent. It covers many options in one application as it is a platform for chatting, shopping, gaming, and even banking. Users can send a Lunar New Year’s red envelope of transferring money, buy a coffee from a vending machine, and hail a taxi or book an appointment.
The most important part of WeChat is that it a has unique messaging service. For example, texting in Chinese characters is cumbersome; WeChat allows users to send quick voice messages instead. Indeed, messaging problems have dropped in China because of it. Tencent is rolling out financial services products that users can tap into WeChat. And unlike WhatsApp, WeChat is free to download for every user.
The comparison extends into politics and geography too. WeChat, similar to all social media apps in China, is heavily monitored by the government; however it does not collect user information beyond a phone number. WeChat, with about 300 million users, is the most used social media app for millions of Chinese users in the world’s biggest telecom market and is making inroads into Southeast Asia and South Africa.
In terms of making money from its users, WeChat comes out on top, according to Chao Wang, an analyst at Nomura International in Hong Kong. WeChat makes money by selling games and integrating online payment functions that encourage shopping through the app. WeChat is expected to bring in 6.8 billion yuan, equals to $1.1 billion, this year, and about 40% more in 2015. According to estimates by Nomura, WeChat’s average revenue per user is $7 per user, compared to $1 per user of WhatsApp. And investors seem to appreciate the extra cash flow. Analysts at Barclays estimate that WeChat is valued at about $30 billion as a standalone business, or about $95 per user, easily exceeding the $19 billion and $45 per user that Facebook paid for WhatsApp.
WeChat has started expanding into US, Europe, and Africa and last year launched a $200 million advertising campaign spanning Italy, India, South Africa, and Spain. And Facebook’s acquisition is a signal that it wants to tap into WhatsApp’s growing presence in countries between the two seems unavoidable, though WhatsApp faces particular challenges in China, where its new corporate parent is banned and WeChat has built a seemingly unassailable lead.
Moreover, unlike social media users that only choose one network, smartphone users may simply use both. Most likely, they would download the two apps on their phones.
About the author
Ling Jiang is a Westminster Business School students (BA IBM).
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