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WeChat's Owner Is Rolling Out Tools for US Advertisers

The platform plans to use the promise of detailed consumer data to entice marketers

September 25, 2017 | Mobile

While much attention is paid to its WeChat messaging property, China-based tech giant Tencent still makes the majority of its money from gaming. In August, the firm reported that its mobile and PC gaming revenues combined had hit RMB28.4 billion ($4.3 billion) for Q2 2017, easily eclipsing the RMB10.1 billion ($1.5 billion) generated by its online advertising business during the quarter.

Still, Tencent is no slouch when it comes to generating income from digital ads. eMarketer estimates that the company’s net digital ad revenues globally will total $5.81 billion this year, putting it in sixth place behind figures tallied by the world’s largest tech firms: Google, Facebook, Alibaba, Baidu and Microsoft.

Tencent will also account for 12.4% of net mobile internet ad revenues in China this year, trailing both Alibaba and Baidu, by our estimates. But that share will climb to 16.6% in 2019.

Net Mobile Internet Ad Revenue Share in China, by Company, 2016-2019 (% of total)

However, Tencent is now looking beyond China to build out its advertising business, and is eyeing the US in particular. Last week, the company announced it was unveiling a new set of tools targeted at US brands looking to connect with Chinese consumers.

Although Tencent operates a number of different platforms—including Tencent Video, Tencent News and desktop-oriented chat platform QQ—the most obvious way for advertisers based in the US to find an audience would be through WeChat.

eMarketer estimates the service will have 494.3 million users in China this year, giving it a penetration rate of 79.1% among smartphone users there.

WeChat Users and Penetration in China, 2016-2021 (millions, % of mobile phone messaging app users and % of smartphone users)

Tencent’s killer app has evolved from a messaging platform to something more closely resembling an operating system, allowing users to do anything and everything from online banking to social networking to bill payment via WeChat’s popular eponymous digital payment tool, WeChat Pay. Users of the app can go for days using only WeChat to order and pay for a range of goods and services such as taxis, entertainment and food.

Tencent is seeking to entice US-based brands and agencies by initially offering the new ad service with a dedicated sales team based out of California to help smooth out any issues in reaching target audiences in China. The ads will appear in WeChat’s Moments feature, which uses a feed-style content publishing model.

One of Tencent’s major selling points to advertisers is the deep trove of data it’s managed to gather on its users. Because WeChat is used for so many different purposes, Tencent has an advantage over other ad publishers, which are often unable to solve the problems raised by cross-device and cross-platform consumer behaviors.

Tencent is also using the growing number of tourists from China visiting the US as a way to draw in US advertisers. The company says its targeting capabilities allow advertisers to begin messaging tourists from China headed to the US almost as soon as they’ve bought their airline tickets.

But even while Tencent is working hard to bolster its advertising revenues, it’s been careful to moderate WeChat’s ad load to ensure users aren’t getting turned off by a deluge of copy. In fact, the company is limiting the number of ads users will see to one per day.

Tencent is clearly in no rush to push ads onto its users, a luxury afforded by the fact that WeChat has a long-established track record of generating income via transactions. But it clearly considers its advertising business important enough to invest in, with an eye to reaping dividends somewhere down the road.

Rahul Chadha

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