WeChat Revs Up With 5.0, Unicom Launch

Feature-packed WeChat 5.0 gets mixed reviews

The headlines have been buzzing with news about the rollout of the latest edition WeChat, which is being called a major overhaul as operator Tecent (HKEx: 700) tries to commercialize the wildly popular mobile instant messaging service. At the same time, media are reporting that WeChat has achieved another major milestone in its new tie-up with telco China Unicom (HKEx: 762; NYSE: CHU), with up to a million people pre-registering for the new Unicom-based WeChat service in the first 2 days after it became available.

This high-profile sudden splash into the revenue-generating business for WeChat follows a successful earlier monetization for Tencent’s QQ instant messaging service that was mostly focused on a previous generation of desktop PC users. In that case Tencent successfully leveraged QQ’s popularity to rapidly become China’s biggest online game operator, overtaking such industry leaders as NetEase (Nasdaq: NTES) and Shanda Games (Nasdaq: GAME). With this latest launch of WeChat 5.0, Tencent is hoping to not only maintain its online game dominance but also to take on e-commerce leader Alibaba with a new generation of online retailing and financial services.

Despite earlier reports that it might delay the launch of WeChat 5.0 due to failure to get approval for the update on Apple’s (Nasdaq: AAPL) China app store, Tencent went ahead and launched the new product on Monday. WeChat 5.0 incorporates a number of major new features, including a gaming platform and integration between WeChat and payment systems that will allow users to pay for their online gaming and e-commerce purchases. The update also includes a scanning feature that will allow users to pay for offline purchases using their smartphones.

The reviews have been mixed so far, with many focused on the wide array of new features in this new update. One reviewer commented that the new version contains too much background noise, and that users are unlikely to want many of the new features, let alone pay for services over the platform. (Chinese article) I’ll admit I have yet to download WeChat 5.0, and will probably wait at least a few months so that Tencent can work out all the problems that inevitably come with such a big new launch.

Tencent’s approach contrasts sharply with one of its main rivals, Sina (Nasdaq: SINA) Weibo, which has been much slower and gradual about its introduction of new services in its own bid to commercialize the popular Twitter-like platform. Sina’s approach has led to slow but relatively steady progress for Weibo in its road to profitability.

Between the 2 approaches, I think Sina’s looks a bit more attractive as it gives users and merchants time to try out new changes in a gradual manner rather than suddenly bombarding them with a wide range of new offerings. Tencent’s rapid-fire approach could alienate some of its current users, which now number more than 300 million. But I do expect that many will discover new ways to use and spend their money on the expanded platform, and that many of the new features will ultimately find an audience.

Meantime, let’s take a quick look at the new WeChat-Unicom tie-up, which was announced last week and involves specially made SIM cards for use on Unicom’s Wo platform. Media are reporting that pre-orders for the SIM cards reached anywhere from 700,000 to as many as 1 million units after they officially became available on Monday. Many of the sign-ups may be existing Unicom users, but I suspect that as many as half may be customers of China’s other 2 telcos. I would expect to see this new tie-up win steadyorders for the next month, giving a strong longer-term boost to both WeChat and Unicom if the new service gets good reviews.

Bottom line: Tencent’s new WeChat 5.0 will see some turbulence due to its addition of many new features, but should ultimately do well as users get accustomed to it.

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