Bottom line: Tencent’s new WeChat push into Europe looks like a better strategy than its previous failed US effort, though it should provide more support to its local partners if it wants to succeed.
After a disastrous and costly foray into the US, leading Chinese mobile messaging app WeChat is gearing up for a new attempt at going global, this time setting its sights on Europe. This particular push has WeChat, a unit of Chinese Internet giant Tencent (HKEx: 700), forming small tie-ups with local European partners to promote the service. The latest of those has seen WeChat link with a small Italian start-up called ChatSim, which provides technology that lets users link up different mobile chatting apps.
Announcement of this particular tie-up is clearly the work of ChatSim, which has put out a slightly amateurish press release announcing the partnership. (company announcement) That said, I do think that more broadly speaking Europe looks like a better place for Tencent to try its luck at global expansion. That’s because the US is already quite hotly contested not only with WhatsApp but also rival instant messaging products from Internet giants like Google (Nasdaq: GOOG) and Facebook (Nasdaq: FB), which also owns WhatsApp.
Wechat in China
Let’s delve right into the ChatSim announcement, which didn’t get too much attention from the global media due to its amateurishness and the company’s own youth and inexperience. According to the announcement, ChatSim will promote WeChat in Europe, with plans to promote the service first in its own home market of Italy. (company announcement) ChatSim says the actual agreement covers the entire European market.
A WeChat spokeswoman confirmed the announcement’s authenticity, but added it is just the latest of a small but growing number of marketing partnerships with local European partners. That would contrast with its highly targeted and expensive campaign in the US last year, which reportedly saw Tencent spend $300 million to boost WeChat in its first major drive outside of Asia.
By comparison, the ChatSim deal looks far less expensive and certainly much lower profile. ChatSim is indeed quite a young company, founded just 6 months ago by a 38-year-old entrepreneur named Manuel Zanella. The deal was signed between ChatSim and WeChat’s Italian operation, which is also helping to promote ChatSim’s own service.
Better Partners Needed
Anyone reading this can probably tell that I’m not too convinced that ChatSim is the kind of partner WeChat should be looking for, even though I do like the idea of targeting Europe due to its distance from WhatsApp’s US base. WhatsApp penetration in various European countries varies widely, from as low as around 5 percent in France and Poland to more than 50 percent in Germany and the Netherlands, according to Statistica. The choice of Italy for its latest European tie-up looks slightly strange, since WhatsApp currently controls nearly two-thirds of the local market there.
While it could face an uphill climb, this European gambit certainly seems to have better chances for success than Tencent’s disastrous foray into its US foray last year. (previous post) It does seem clear that Tencent still wants to try to take WeChat global, and this latest approach certainly seems more cautious, less costly and unlikely to generate the huge expectations that came with the US campaign.
Tencent in China
Tencent is hugely popular in its home China market, with more than 500 million users. But one of its biggest problems outside the country is credibility, since many westerners may be wary of using a product from a country where censorship is widely practiced. As a big user of WeChat personally, I don’t think the privacy issue is really a big problem. But perceptions can be difficult to overcome, and China’s reputation for strict censorship will be a difficult obstacle for any Chinese Internet company looking to expand abroad.
This lower-key style of promotion that relies on third-party tie-ups outside China is actually quite typical for Chinese Internet companies, which often pay their local partners get people to download their apps. But if I were advising Tencent, I would suggest it be more careful with a valuable brand like WeChat, and that it provide better support in this kind of partnership to make its global initiatives look more professional.