What Social Commerce Marketers Need to Know About Tencent

Chinese social media giant Tencent this morning became more valuable than Facebook as its shares gained 2.4% in Hong Kong. The owner of the WeChat messenging app, that has 1 billion users, is not a familiar brand in the West but is now the fifth most valuable listed company in the world with a market capitalisation of over $500 billion. WeChat’s success is based on having managed to combine being a popular ‘messenger’ with also acting as a commerce, customer service and payments ‘portal’.

Launched in 2011, WeChat benefited from the fact that competitors such as Facebook and Twitter are banned in China, as is Google. However, it would be doing Tencent a disservice to say that its flagship social media app owes its success to a lack of competition from the big U.S. social media. The company’s commercial model has been very successful and many of the social commerce functionalities that it introduced have since been replicated by the likes of Facebook.

So why has WeChat been so successful in driving revenues and what can social commerce marketers learn? Watching WeChat open new revenue streams and develop existing successes is important not only for social commerce targeting the Chinese market but because these can be expected to be shortly replicated by Western social media.

WeChat was the first messenger app to make a success of money transfers. Its ‘red envelope’ payments are like an electronic version of the Chinese New Year tradition of presenting envelopes containing cash. Users use the payments system to send each other payments or cash gifts. WeChat has had such huge success with red envelopes by gamifying it. For example, users can send $5 to a group of 10 friends, with the first two to tap and open the red envelopes receiving $2.5 each and the other 8 being left empty handed. So when an envelope arrives users tap furiously to open it as quickly as possible.

Opening a red envelope, however, is more important than simply being a system for small cash transfers. It means a WeChat wallet is opened to store the money received. This comes with a host of other commerce features such as buttons to buy theatre and movie tickets and others to book travel, choose and buy gifts or pay utility bills. There are virtual shops available within WeChat.

Another WeChat red envelope innovation is a partnership with Starbucks that let users buy and send friends or family members a coffee or pastry. The tagline to the project is that it encourages “everyday acts of kindness and appreciation”.

WeChat groups are also used for social commerce. Motivational group chats can charge a monthly subscription fee to join or someone in a fashion group might announce a trip to Europe and an offer to take orders for clothes or fashion accessories. These orders can be taken directly or through a third-party social commerce platform hosted on WeChat. Purchases can be made without ever leaving the app.

Group chats are also limited to 100 users unless the Wallet payments system is activated for the group. This raises the limit to 500 members and then encourages some form of commercial activity to take place.

Western social media giants can learn a huge amount about how a simple ‘messenger’ app has outdone them all when it comes to maximising existing revenue streams and adding new ones. Facebook Messenger has launched a payments system but so far payments can only be made between individuals and not to companies. When last year Facebook hired Dan Grover, a WeChat product manager from its internationalisation division, it was presumed that the company was preparing to enter China. However, a quick look at new Messenger features such as payments, games, and taxi hailing suggest that cloning successful commercial elements of WeChat was the more likely the incentive.

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