Marketing in China: What Marketers Need to Know About WeChat
Matthew Brennan, a WeChat expert and co-founder of Shanghai-based consultancy China Channel, spoke with eMarketer’s David Green about WeChat’s unique ability to resist monetization pressure, new ad programs and what brands need to know about marketing on the platform.
eMarketer: WeChat’s 2016 data was mind-blowing, with 768 million daily active user stats, but these numbers must be approaching a ceiling. What does Tencent need to do to keep its investors happy going forward?
Matthew Brennan: Yes, they are going to hit a ceiling soon. They’re not going to expand outside of mainland China. If they did a major campaign they could possibly take Malaysia, given that there’s a lot of ethnic Chinese there, but that would really be it.
If you want to look at the future of WeChat, then look at [Japan-based mobile messaging app] Line—its global user numbers actually went down in the last quarter. Line topped out at 220 million monthly active users, and WeChat is going to top out as well.
eMarketer: And that means mounting pressure to monetize the user base?
Brennan: The WeChat team is very interesting. They’re in Guangzhou. They’re not in Shenzhen with the rest of the Tencent head office. They’re run by Allen Zheng, who’s not a marketer. He’s a very techie, geeky guy.
I went to their conference in December—the biggest event WeChat’s ever run—and I couldn’t find the Tencent logo. That tells you something. They’re very independent, and they get a lot of leeway from the executive team because of their massive success. They get away with stuff that perhaps other divisions won’t, and one of those things is protecting the user experience and not going heavy on monetization.
“The plan is to increase WeChat’s ad loads and monetize further, but the real plays are for payments.”
eMarketer: Is there another company that is similar in the market?
Brennan: When you look at Facebook, they’re kind of doing the same thing. They’ve got WhatsApp, which has crazy numbers, and they’ve done nothing to monetize it at all.
It’s similar with WeChat. The ad load inventory is less than one ad per day, and when you compare that with Facebook global, Facebook’s doing at least 10 ads per day, so there’s ample room to improve. The plan is to increase WeChat’s ad loads and monetize further, but the real plays are for payments.
eMarketer: That payments play puts WeChat in a running battle with Alibaba’s Alipay. How is that contest developing? What are the trends in the type of payments sent through each service?
Brennan: Alipay’s still leading the market for payments. Chinese users will use Alipay for large transactions, and WeChat pay has started small with micropayments, which is what hongbaos are, but there’s a huge number of them.
The average value for transactions for ecommerce stores on WeChat is [also] going up. Chinese people are comfortable making transactions of thousands of yuan on WeChat now, which wasn’t the case maybe a year ago. The case study of Mr. Bags with Givenchy [where RMB 1.2 million ($180,635) of merchandise was sold in 12 minutes] is a good example of the higher end of what people are willing to pay for now on WeChat.
“Chinese people are comfortable making transactions of thousands of yuan on WeChat now, which wasn’t the case maybe a year ago.”
eMarketer: WeChat mini programs, or mini apps, which launched in January, are the topic of the moment. How do you see the use of mini programs interfacing with mobile payment?
Brennan: Mini programs are very interesting. There’s been no classic case study to come out of how mini programs can really add value to an organization, and that’s what we’re waiting for.
It is very early days, and the timing of the launch wasn’t perfect since it coincided with Chinese New Year. We might see something interesting in the next couple of weeks or months. Certainly given the amount of press and hype that Tencent built up, I seriously doubt they’re just going to let them fade. That would be a big loss of face.
eMarketer: How available to marketers are Tencent and WeChat when they launch something new like this?
Brennan: For WeChat, they have their WeChat Open Class—a series of events that they do around China, where they showcase good case studies, and through that, businesses learn how to use the platform.
[But] compared to Alibaba, they’re very closed, and certainly, foreign organizations in particular have terrible trouble getting ahold of them. Tencent is a very service-focused company—making most of their money from a value-added service, and that’s their mindset. [They are not focused on] direct marketing.
“The new form of advertisement, local ads ... you can target more than 4,000 different districts all over China in all the major cities.”
They look for ways to provide value to the user, and that’s why offline is important for them, and payments are important. They’re really looking to integrate WeChat into people’s lives. The classic phrase from Allen Zheng is, “WeChat is a way of life,” and that’s the slogan they’ve had since 2012.
eMarketer: Are they aggressively collecting and sharing the online-to-offline data they gather on users’ lifestyles?
Brennan: Last year they did a few big deals—announced as [ecommerce partner] JD and WeChat [providing] more data for the big agencies. In general, the data you get from the platform about individual users is meager.
And this is a big problem for marketers. If you’re not using an advanced CRM [customer relationship management] tool, if you’re just using your basic WeChat back end, you’ve really got very, very little information about your followers.
eMarketer: As a marketer, what’s the best strategy for delivering your message or content to users?
Brennan: You can pay Tencent for Moments advertising [to the WeChat timeline]. But it’s only really suitable for big brands because of the high price [$7,500 to $20,000], and it’s more for brand advertising than trackable or pay per click.
For a small or medium-sized company that wants to attract ROI [return on investment], the new form of advertisement, local ads, is very interesting. Local ads opened up in November at a much lower price point: RMB 300 ($45.16). With local ads you can target more than 4,000 different districts all over China in all the major cities.
“I read a Chinese report saying a test of live streaming platforms found that the number of bots compared to the number of real views is 400-to-1.”
So that’s suitable if you have offline locations, and for a very low cost you can test the market. A lot of small businesses in China, restaurants for example, are using it. That’s Tencent’s goal—they said that in the last earnings call—to increase the number of advertisers [rather than ads] on the platform.
eMarketer: Do the limits on direct marketing through WeChat place too much power in the hands of key opinion leaders [KOLs]? And what is best practice in terms of working with them?
Brennan: Don’t just push the press release on them. If you find the right KOL, they’ll know their audience much better than you do. Work with them to make excellent content. Putting a bit of time and effort into actually thinking about how you can write the article and do the promotion will pay lots of dividends.
eMarketer: How well is Tencent performing when it comes to stopping the bots that can give these KOLs inflated reach or follower numbers?
Brennan: Bots are definitely a problem on all media. I read a Chinese report saying a test of live streaming platforms found that the number of bots compared to the number of real views is 400-to-1.
[That’s not WeChat’s problem alone,] but it links into the discussion about KOLs. A couple of months ago Tencent changed the back end, and suddenly all the accounts couldn’t fake their views anymore.
Tencent released a statement at that time saying, “We want to ensure that we have a healthy platform,” and they also acknowledged that it’s a game of cat and mouse—that they can change their back-end settings but people will always find ways around that because there’s such a monetary incentive to do so.