Released in 2011 by Tencent, WeChat is a key instant messaging application in China, with the number of monthly active users in the Q3 2019 to now being 1.15 billion across many age groups (Statista, 2020). Its success has been contributed to by its digital business, which has continued to evolve and diversify over time such that WeChat’s business model is more complex. A key feature is the WeChat Moments, which is accessed by 61% of users every time they use the application whilst 22.6% of the users use this function frequently (Statista, 2020). There are inbuilt voice and text messaging functions and group messaging to provide flexibility to the interaction amongst users (Statista, 2020). A function in the application also enables users to follow accounts, including individuals and corporations, where there is an embedded social commerce (Yeweng and Yan, 2017). Furthermore, there are games in the WeChat which can be played between users, to enhance the hedonic experience for the users.
The overall business model of WeChat is freemium, as it is currently free to download and use which has made it attractive to a large user base. The features in the application including WeChat Moments are free for the users. It generates its revenues primarily from the value-added services including the virtual stickers and games (Economist, 2014). Virtual stickers are moving graphics that is used in social media to support communication including images and animated gifs (Xinhua, 2018). The virtual stickers are highly popular in Asian markets since they support the informality of conversation. Approximately 5.2% of users have paid to use WeChat stickers in 2015 (Statista, 2015). These virtual stickers help to increase individual expressivity. There are hundreds of virtual stickers that are available to the users, with the majority of these being free although a set of perhaps 16 to 24 stickers can be purchased for a small fee. However, given the large user base, the sale of virtual stickers can be quite lucrative.
The games on WeChat assumes a strategic role in the generation of users and revenues for the company, Tencent. The game centre operates like a gaming platform which integrates games from other platforms owned by Tencent including QQ. In addition, WeChat partners with King to launch Candy Crush Saga to reach outside the Chinese market. These games help to increase the user stickiness to the mobile phone application (Murphy, 2015). In addition, the appeal of these games in WeChat in comparison to standalone games is due to the close connection with the social features of WeChat. For example, the fact that the games are free to download and play and the encouragement of users to share their scores in the games with other friends on WeChat helps to grow the user base as a result of the network effect. The competitiveness amongst friends encourages users to make in-app purchases such as extra lives in the games. The Q4 performance in 2019 sees the online gaming revenues generating 28.5% of the total revenues for Tencent (Liao, 2019).
WeChat also extends its services to e-commerce with WeChat Pay which is used widely in China as well as online-to-offline (O2O) services. This enables users to connect their bank account to WeChat, such that WeChat becomes a digital wallet (KPMG, 2019). When buying products or services, the user simply scans the QR code in stock or to select the item on WeChat is the brand has an official store on WeChat. This helps to increase the exposure of businesses in China, attracts and retains users due to its convenience as well as enabling WeChat to collect vast consumer data including their transaction history, demographics and online behaviour that can be used to tailor the experiences of the users and to sell to business partners. Furthermore, the use of WeChat Pay generates commission from the merchants.
Figure 1: Share of the key players in the mobile payment market of China by transactions in 2018 (KPMG, 2019)
All in all, the success factors of WeChat lie in its digital business model which adopts a freemium business model which has helped it to build one of the largest userbase in China. The diversity and free to use functions which are social-related help to improve the stickiness of the application for users and provide new channels to generate income. Interestingly, the WeChat application is free from advertisements, which help to emphasise the application for being social-focussed. For example, other features including ‘Look Around’ which allows users to find strangers near them using the same application and ‘Drift Bottle’ which allows users to send anonymous messages and voice messages to be picked up by someone around the world helps to expand relationship chains (Yang et al., 2016). Furthermore, Tencent restricts the brand official accounts to limit promotional messages sent to the public in order. Finally, the partnerships with leading service providers enable WeChat to continue delivering new value to customers, whilst it is well-positioned to leverage consumer data using big data analytics to continually develop the application to deliver strong value proposition to users.
References
Economist (2014) Nice little earner [online] Available at: https://www.economist.com/china/2014/01/18/nice-little-earner [Accessed: 01/03/2020]
KPMG (2019) The rise of the tech giants [online] Available at: https://assets.kpmg/content/dam/kpmg/cn/pdf/en/2019/09/the-rise-of-the-tech-giants.pdf [Accessed: 01/03/2020]
Liao R. (2019) Tencent Q4 profit disappoints, but cloud and payments gain ground [online] Available at: https://techcrunch.com/2019/03/21/tencent-q4-2018/ [Accessed: 01/03/2020]
Murphy I. P. (2015) How retailers use gamification to drive engagement [online] Available at: https://www.retaildive.com/news/how-retailers-use-gamification-to-drive-engagement/399772/ [Accessed: 01/03/2020]
Statista (2020) Number of monthly active WeChat users from 2nd quarter 2011 to 3rd quarter 2019 [online] Available at: https://www.statista.com/statistics/255778/number-of-active-wechat-messenger-accounts/ [Accessed: 01/03/2020]
Statista (2015) Share of WeChat users in China who have used WeChat stickers as of January 2015 [online] Available at: https://www.statista.com/statistics/387697/wechat-china-mobile-sticker/ [Accessed: 01/03/2020]
Xinhua (2018) China Focus: Online stickers jump off screen for profit [online] Available at: http://www.xinhuanet.com/english/2018-08/01/c_137361892.htm [Accessed: 02/03/2020]
Yang X., Sun S. L. and Lee R. P. (2016) Micro-Innovation Strategy: The Case of WeChat Asian Case Research Journal Vol. 20 No. 2 pp. 401-427
Yeweng X. and Yan M. (2017) The Present Situation and Strategy Analysis of WeChat Marketing Advances in Computer Science Research Vol. 61 pp. 408-412
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