WeChat, the most popular messaging app in China, which boasts 963 million users, is opening up its service to U.S. advertisers. Today, its parent company Tencent announced a new ads platform designed to attract Western brands and ad agencies to the app, with Zillow and Rebecca Minkoff signing on as launch partners.
The aim for Tencent is to leverage its reach with the huge swaths of Chinese consumers coming online, a market segment that U.S. companies have historically struggled to target. But the launch also comes at a time when tech giants around the globe are tinkering with how to generate revenue from the rapid growth of their communication services, from Apple reportedly experimenting with business chat tools to Facebook testing ways to monetize Messenger and WhatsApp. And it arrives as some tech giants in the U.S. and China eye each others’ markets and wonder, in spite of the perils, how to break in.
For WeChat, as with most of its competitors, the trick will be balancing its monetization efforts with the tolerance its user base has for mobile ads. Since launching in 2011, WeChat has become China’s central all-in-one app, offering an ever-expanding range of smartphone services–chat, social media, payments, news, hotel bookings, dating, and so on–and has seen its growth explode in recent years, roughly quadrupling its monthly active users since 2013.
Yet revenue from online advertising, while soaring around 59% last quarter year-over-year, still represents just around 17% of Tencent’s overall revenue, which Poshu Yeung, VP of the company’s international business, says is on purpose.
“We’re trying to preserve the user experience,” explains Yeung, who says the company is limiting ads on the WeChat platform to one per day. “We could dive in and make a lot more money, showing five ads per day and likely making five times more revenue, but that’s not what we want to do. We’re going to take this slowly.”
“You go to Palo Alto, you don’t see that happening.”
The ad types themselves, whether traditional banners or interstitials, are nothing novel–“this isn’t rocket science,” Yeung says–but more important than format will be content. China’s digital culture differs from the West in many ways, with unique societal norms migrating online. Consider the phenomenon of person-to-person payments via digital versions of traditional “red envelopes“: In recent years, the payments have exploded on WeChat and Alipay, a rival mobile app that provides similar social media services. It’s increasingly common for Chinese consumers to keep their savings in Alibaba-owned Yu’e Bao accounts, for example, sort of the American equivalent of directing all your income earnings to Venmo rather than a Citibank account.
Predictably, this makes China a unique “ad culture” too, Yeung adds, one reason why so many “[U.S] marketers think of China as such a mystery. We’re trying to solve that mystery for them, to create a more comfortable process instead of it feeling like they’re shooting blindly for the stars.”
Toward this end, Tencent says it will build out a dedicated U.S.-based team to provide advertising support to Western brands to help them more effectively target Chinese consumers and tailor ads to “local culture,” as Yeung puts it.
“I keep telling people, if you come to China, when you eat dinner, you see everyone’s phone on the table, that’s how hardcore Chinese users are with their mobile phones,” Yeung says. “You go to Palo Alto, you don’t see that happening.”
“No Comparison With Anything In The U.S.”
But WeChat’s biggest value proposition is arguably the data it captures. With WeChat and Alipay tapping into such an eclectic mix of user behaviors, the data they collect is particularly attractive to advertisers.
Albert Liu, EVP of corporate development at Verifone, which partnered with Alipay last October to bring its payments service to the U.S., told me recently, “The advantage of super lifestyle apps like Alipay or WeChat is they’ve connected incrementally more data than an app that’s just focused on a single area: Alipay [and WeChat] know where you’ve traveled, what movies you saw, what restaurants you ate at. There is no comparison with anything in the U.S. Maybe Facebook eventually gets there–maybe.”
Still, while Tencent’s long-term hope is that more U.S. brands will want to shift their digital ad budgets into marketing in China, it’s likely their more immediate push will go after the millions of Chinese consumers increasingly traveling to North America, who, Yeung notes, spent roughly $35 billion stateside last year alone.
Just as Uber and Amazon and Facebook have struggled in the Chinese market, so too has Tencent struggled to bring WeChat to the U.S. and other Western markets. But by going after U.S. advertisers, Yeung says Tencent sees another way to educate Americans more broadly about the promise of WeChat.
“Hopefully with more merchants and more brands and more news [about WeChat], he says. “They will start understanding [us] and start adopting the WeChat ecosystem.”