• Fri
  • Dec 19, 2014
  • Updated: 2:07am
Corporate China
PUBLISHED : Thursday, 13 February, 2014, 4:21pm
UPDATED : Thursday, 13 February, 2014, 4:21pm

WeChat wrings money from Unicom, Wangfujing

WeChat's new tie-up with Wangfujing Department Store and plans to expand its partnership with Unicom reflect acceleration of its commercialisation drive, as it steals momentum from Sina Weibo

BIO

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young’s China Business Blog (www.youngchinabiz.com), commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, “The Party Line: How the Media Dictates Public Opinion in Modern China.”
 

Much has been written about the meteoric rise of Tencent's (0700.HK) WeChat mobile instant messaging service, with many drawing parallels to the equally rapid ascent of Sina's (Nasdaq: SINA) Weibo microblogging service starting in 2010. But while Sina has struggled to wring money out of Weibo, Tencent is having much more success with WeChat, as evidenced by news of its latest commercial tie-ups with retailer Wangfujing Department Store and mobile carrier China Unicom (0762.HK; NYSE: CHU). I have a lot of respect for Sina, which has emerged as a leading information provider in China since it first went public in 2000. But the company has shown itself less adept at earning money, unlike Tencent, which has proven much more skillful at milking cash from its innovative core social networking service (SNS) products. 

Let's start our roundup of WeChat's latest commercial tie-ups with a look at a new partnership with Wangfujing, one of China's leading department store operators. Under the tie-up, WeChat users will be able to pay for purchases at Wangfujing stores directly from their WeChat accounts. Wangfujing will also operate a public account on WeChat where users can peruse and purchase merchandise. That arrangement could be setting off alarm bells at e-commerce leader Alibaba, which operates similar platforms where third-party merchants can sell their goods to online shoppers.

I don't know much about Wangfujing, and presume most of its business is confined to its hometown of Beijing. What's more, the company is in the very mature department store business, which probably doesn't have a very bright future in the current age of e-commerce and specialty stores. Still, this kind of partnership could easily provide a template for other brick-and-mortar retailers to follow, which could quickly become a major new revenue source for both Tencent and WeChat.

Many readers may recall I wrote last week about Tencent's big success with a hongbao red envelope promotion over Chinese New Year, which ultimately saw eight million WeChat users bind their bank cards to their WeChat accounts to electronically send gift money to friends and family. Tencent didn't gain any revenue from that promotion, but benefited by gaining a huge new audience that is now much more likely to make purchases over WeChat. Many of those users could now become customers for online stores like this new one in partnership with Wangfujing.

Meantime, separate media reports are saying that Unicom is in talks to expand its tie-up with WeChat beyond an original trial program in southern Guangdong province. Under that tie-up launched last year, Unicom created a special WeChat SIM card for users of its own Wo brand service, including free or discounted airtime for WeChat use. That tie-up met with positive initial reception, though the latest reports say it ran into some unspecified troubles later. Still, the pair were satisfied enough that they are now in talks to expand the partnership beyond Guangdong to several other provinces.

Sina has been engaged in a similar scramble to commercialise Weibo through a number of tie-ups over the last two years, including its sale of a minority stake in Weibo to Alibaba last year. But from an observer's perspective, I have to say that Tencent seems to be advancing much more quickly in its commercialization drive through a wider array of creative tie-ups. Sina seems to realize that Weibo is quickly losing momentum, adding urgency to its own plans to spin off the unit for a separate New York IPO later this year. I would suggest it try to make that offering as soon as possible, as it looks likely to lose momentum throughout the year to Tencent's more aggressive and innovative commercialization drive for WeChat.

Bottom line: WeChat's new tie-up with Wangfujing Department Store and plans to expand its partnership with Unicom reflect acceleration of its commercialisation drive, as it steals momentum from Sina Weibo.

To read more commentaries from Doug Young, visit youngchinabiz.com

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