Tencent WeChat Looks Globally 腾讯微信全球化

A social networking (SNS) application called WeChat has boomed on China’s Internet over the last two years, challenging Twitter-like industry leader Sina (Nasdaq: SINA) Weibo and even cellular titan China Mobile (HKEx: 941; NYSE: CHL) with its innovative and cleverly designed features. Now the popular instant messaging program for smartphones is showing early signs of stepping onto the world stage, with the potential to become China’s first true contribution to a vibrant global Internet culture. Such a development would mark a significant milestone for China, whose most successful high-tech firms have thrived so far by largely copying existing global technologies.

WeChat has been in the headlines nearly nonstop since the middle of last year, as it soared in popularity following its launch in early 2011. The application, known as Weixin in Chinese, made headlines early this year as it passed the 300 million registered user mark, closing in on the older Sina Weibo which itself recently passed 500 million users. WeChat also recently clashed with China Mobile, which complained it was losing traditional SMS business to WeChat.

Last week WeChat, which is owned by leading Chinese Internet firm Tencent (HKEx: 700), was back in the headlines with its announcement of an innovative new service that combines its unique voice capabilities with e-commerce. (English article) Using the new service, users will be able to say the names of products they want to purchase, and then see a list displayed on the screen of their smartphones.

WeChat’s voice capabilities, which allow people to use their phones like walkie-talkies for free, are just one of a number of innovative features that set it apart from similar global products like WhatsApp. WeChat also includes location-based services that allow people to find and chat with other users nearby, as well as Facebook-like features that allow users to share photos, audio clips and web links with their friends.

Those and other popular features have helped the service to win an increasingly international audience, which includes more than 10 million people outside mainland China, according to industry estimates. Reflecting its global ambitions, WeChat confirmed Monday that it was taking steps to prepare for an expansion into the US, which include the opening of an office in the country. (Chinese article)

By comparison, other successful Chinese Internet services have had a much harder time breaking out of their home market. Despite years of effort, Internet search leader Baidu (Nasdaq: BIDU) has made minimal inroads to Japan after launching a service there. Other names that have similarly flourished in China are also unlikely to find much success abroad because they have largely copied foreign companies, which is the case with Sina Weibo that is very similar to US-based Twitter.

By comparison, Tencent, which rose to prominence a decade ago with its popular QQ desktop PC instant messaging service, has drawn on that expertise to develop WeChat. While it’s still too early to say if WeChat can replicate its success outside of China, the early signs indicate it is finding an audience among global users who like its wide array of innovative features. If the company can continue to improve and promote the service, it could quickly build up a worldwide audience of hundreds of millions of users, demonstrating that China can not only be an Internet follower but also that it can develop products that rest of the world wants to use.

Bottom line: Tencent’s WeChat could become China’s first globally successful Internet application, drawing on the company’s strength in instant messaging.

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