Tencent – Age of empires.

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The WeChat empire spreads its wings.

• Not content with its dominance of the 3^rd party app stores in China, Tencent has doubled down on WeChat with the intention to entice users to spend more than just the Instant Messaging portion of their Digital Lives within WeChat.
• At an event for developers on January 15^th, Tencent announced that it within WeChat there are already 580,000 3^rd party apps and services with more than 1m developers and businesses actively engaging with the platform.
• It is important to note that these are not fully-fledged apps (called mini programs) but more like extensions to WeChat that enable some extra functionality.
• This can be taken as far as basic games (like Facebook has also done) but not much further.
• Tencent also announced that it had reached 980m MaUs on WeChat but this figure had already been announced at the Q3 17 results and so it is less relevant here (see here).
• This is way ahead of what Facebook has achieved which has focused mostly on bots of which there around 200,000.
• However, given Facebook’s weakness in AI (see here) and my own cursory tests, I suspect that the usefulness of these bots is extremely limited and does very little to enhance the usefulness of the Messenger platform.
• Tencent on the other hand has encouraged the development of a large range of varied services that include:
  • First, e-commerce: Many retailers have added apps that allow the user to scan a QR code and avoid the queue at the till.
  • User experience is a major issue for offline retailers (see here) and any simple app that enhances the experience even slightly is likely to be well received.
  • Many brands and content providers are also using WeChat to provide loyalty and discovery for their products and services.
  • Second, lifestyle: Many restaurants and services such as bike sharing schemes offer their services within WeChat making access much easier.
  • Furthermore, because these are much simpler apps, they are easier to write, reducing the barriers to entry for smaller businesses.
  • Third, government: Some government entities are also present making things like paying traffic fines much simpler and easier for users.
  • Fourth, games: This is Tencent’s bread and butter and simple multiplayer games make a lot of sense in a chat app.
  • This is something that many of the other chat providers like LINE and KakaoTalk already do and given the size of Tencent’s network, this makes a lot of sense to drive further engagement.
• Tencent is miles ahead of its competitors in this area as its peers are still slugging out in the brutal app store space and do not have the network with which to attract developers and service providers.
• This is yet another sign that Tencent is increasingly the strongest ecosystem in China as neither Alibaba or Baidu have the breadth of dominant consumer services that Tencent has.
• This is why Tencent remains my top choice both in China and globally.
• However, it has had a very good run and it is worthy noting that RFM ranks Baidu the global No. 2 in AI and by far the No. 1 in China.
• With all of the hype and high valuations surrounding AI these days, it is surprising that Baidu has not recovered more.