What's the Next Step of WeChat after Reaching 600 Million Users

Tencent second quarter earnings in 2015 showed that the monthly active users are over 600million. The simple growth number cannot meet the capital markets expectation of Tencent. But the $800 billion valuation may not overestimate WeChat’s possibility in future. Besides the users’ rapid growth, high mention frequency of WeChat in earnings suggests that WeChat, as the accelerator engine of Tencent, will face new situation.
1. 600 million users, $80billion valuation

The global monthly active WeChat user accounts reached 600 million, increasing by 37% compared with the same period last year.

Releasing WeChat four years later, the growth speed of WeChat monthly active users still amazing.

Looking from the absolute number, the first quarter in 2015 increased by 49 million. The second quarter increased by 51 million, while the overall size monthly active users reached 600 million. 

The first quarter earnings showed that monthly active users of smart terminal in Qzone increased by 22%, 568 million, compared with the same period last year. Higher than the number still, 539 million of WeChat. At the second quarter, the growth number reached 15%, monthly active users reached 574 million. The quarter growth number, 6 million indicates that the users growth of smart terminal in Qzone is getting closer to the ceiling. 

At the same time, the monthly active accounts of QQ reached 627 million compared with the same period last year. The user number increased by 2.4million compared last quarter’s total number, 620 million, which new monthly active users’ growth rate less than half of WeChat. There is no doubt that WeChat monthly active users’ will surpass QQ in this trend.

Nowadays, the report released by HSBC showed that WeChat valuation over $80 billion, reached $83.6 billion. This figure takes up half of Tencent markets value, surpassing the current value of Ford.

Compared with the simple and limited value-added services of QQ, “connecting everything” of WeChat seems more attractive.

2. Fighting each other under social community strategy

Several days before, QQ start up social community strategy. As an old APP which has history more than 10 years, QQ always on the way to pursue innovation and changing. 

Vice president of Tencent Yu Yin disclosed that their new product, interests’ tribe, the accumulated amount has exceeded 200,000, which visit users reached 100 million. 

Besides that, People are expecting the next step of QQ public account. Related officials predicted that QQ public account will open at the third quarter. At that time, the advantage of QQ public account is not the leading active user scale, but the resonance effect will produce with the existing products. 

QQ public account and WeChat public account are similar in function, a platform to push information by operators. Interests’ tribe is same with Baidu post bar, where users can post and browse freely. Together with QQ community, these three things form a fully functional social community system with notifications, discovery and interactional function. 

Interests’ tribe is a product for young group, matching the nature of its own users. Young are more open with new things, admitting the relationship formed online. The name of it showed that new generation of netizens get together through interests, forming an independent circle. 

Compared with QQ, WeChat is not suitable to operate social community. WeChat do more work on transfer acquaintances offline to online.

But there is no doubt that WeChat and QQ are similar in basic communication function, which caused people hard to keep passion on both of them. Therefore, there is a big difference between the age distribution of QQ and WeChat. 

The competition between WeChat and QQ seems like a fighting between left hand and right hand from a person. For low age people, they are facing the selection of using QQ still or accepting WeChat. Whichever choice they made, the last win belongs to Tencent.
 
3. The way to overseas 

Tencent transferred the development direction of WeChat to improve overseas users’ participation (especially Asian emerging markets) since to improve specific overseas users’ participation at the first quarter earnings of Tencent.   

According to the market information in public, there are about 100 million overseas WeChat users (never suggest this number refer to registered users or active users). Two years ago, WeChat has entered many countries, which leaded instant message field in some countries such as Mexico and so on.

In fact, East Asia is the global leader in the field of instant message. WeChat in mainland of China, Line in Japan and Taipei, Kakao Talk in South Korea are dominant in their own domains. For WeChat, it faced powerful opponents from east and south, causing entered west markets more possible.

But the good news is that the usage rate of WeChat in India mobile users reached 21% (a report of Global Web Index, Q3, 2014), better than Line (14%) and Kakao (4%) at the same period last year.

It seems not so easy for the international process of WeChat, but the leaders of Tencent continous adjust the strategies to work on it. 

4. The trump that haven’t show 

The highlight in the second quarter earnings of Tencent is the online advertisement service, which increased its year-on-year segment volumes by 97% to 4.073 billion yuan, and its main impetus comes from mobile social internet effect ads and video ads. Both of them are benefit from the mobile, the former increased its year-on-year segment volumes by 196% to 2.057 billion yuan, and the latter is the second times of its year-on-year segment volumes.

It is generally think that the meaning of the strategy that WeChat only permits Tencent video is significant for the development of Tencent video. On the one hand, it brings lots of traffic to it. On the other hand, it leads to many videos of high quality putting on Tencent video. And the latter is obviously of greater importance.

Another phenomenon which deserves to be mentioned is that with the widespread of the image-text message, many strong operation teams are transforming their attentions to short videos which are of higher threshold, more distinctive and more benefit.

From the perspective of content value ladder, short video is surely become the key part of competition in the next stage. They know what our audience like and have the ability to grow up to a professional video-making team. More importantly, it is also helpful for them to get rid of the title of grass-roots and to create their own brand then make more profit.

For Tencent, the user generated content will surely become their unique advantages when competing with other rivals. It is noteworthy that Tencent video has no ads in WeChat, but in PC and mobile has video ads. This is the veiled trump of Tencent video.

5．The effect of the effect ads

Through enlarging our ads resources, advertisers and optimizing internal business process we can improve the ads effect. We encourage content providers to offer more content with high quality and by doing this to promote our customer’s participation degree.
which through online demo on July last year. And the other is the ads in friends circle which launched online on January this year.

Ads in friends circle provides more possibilities, but the slogan that “ads may be a part of life” still needs practice to prove.

Ads in friends circle caught lots of attentions at the time when it started, and many use the word “amazing” to describe it. Recently, WeChat friend circle platform is on coming which makes many small businesses see hopes. And according to the industry’s speculation, in order to guarantee the user experience WeChat may limit the frequency of ads that appear in the friend circle making you can see only one advertisement in every 24 hours.   

If we calculate as 40yuan per thousand times of exposure, the revenue could at most:

6,000,000,000*365*40/1000=8.76billion 

It includes two kinds of WeChat ads: one is Guang diantong ads 

But if WeChat wants to make sure this number of revenue, it must make sure that users should see more than 2 ads in friends circle every day. The contradiction between user experience and commercial benefits is what WeChat has to face.

On August 21st, WeChat updated its rules again. Public numbers which have original function now no longer need 50 thousand fans to become the traffic provider, it just need 10 thousand.

6. Meaning of the originality

For WeChat, we promote original content and reward function to improve users’ experience.

WeChat content ecology has changed a lot after the promotion of original statement function.

1. Plagiarize has decreased obviously. Especially some of the article writers ask for showing the original source. On the other hand, it benefits from the simplification of whistle-blowing process and more serious sanction.

2. Original content become popular. Those operators who pay efforts on original content have entered a stage of harvest. The slogan“content is the king” is revival.

3. WeChat becomes the original content’s first issue platform. And depending on the protection of copy right and good social media propagation effect, WeChat collected lots of high-quality original content.

On the other hand, the reward function which was promoted in March has become a new method to connect operators and fans.

In the China WeChat top500 report (2015, 07), Zhanhao ranks first and he gained 14 thousand reward within one month, and recently, he created another new record.

The main purpose of reward is not gaining money, but to show your support.

Through a small-scale test in earlier stage, original content and reward will enter into a strong promotion period. We can foresee that more and more public account which pays attention to original content will benefit a lot, and of course, the biggest winner will be WeChat platform.