The View

Silicon Valley trying to catch up with China -- not the other way around

PUBLISHED : Monday, 23 November, 2015, 3:35pm
UPDATED : Monday, 23 November, 2015, 3:36pm

When photographs circulated of Mark Zuckerberg proudly holding a copy of Chinese President Xi Jinping’s recently published autobiography, most commentators figured the Facebook founder was once again sucking up to Beijing.

After all, it’s election season in the United States, which means candidates will be bashing the Chinese to gain votes, making life harder for those doing business in China or, like Zuckerberg, trying to wangle their way into a market currently protected by various ministries, from propaganda to security. Thus Zuckerberg’s eager diplomacy, which, besides the eyebrow-raising reading list, includes language lessons in Mandarin.

One way politicians have been bashing China this year is to accuse the country of being copiers rather than creators. “They’re not terribly imaginative,” Republican candidate Carly Fiorina has said of the 1.3 billion Chinese. “They don’t innovate—that’s why they’re stealing our intellectual property.”

Moreover, sceptics say companies such as online retailer Alibaba or search engine Baidu simply transferred the business models of Amazon and Google to their own country – where their government makes sure that foreign competitors could not effectively tread.

Some in Silicon Valley vigorously contest this view about China’s Internet sector. The venture capital firm Andreessen Horowitz recently published a research article on the wonders of the technology behind WeChat, the messaging app that can be used for everything from chatting with friends to hailing a taxi to getting investment advice from a banker. Its parent company is Tencent Holding, which has some co-investments with Andreessen.

“While seemingly just a messaging app, WeChat is actually more of a portal, a platform, and even a mobile operating system depending on how you look at it,” writes Connie Chan, a partner with the Silicon Valley financiers.

Chan argues that US companies like Facebook and Yahoo, among many others, should and likely will adapt WeChat’s “pioneering” technology on mobile commerce. The genius, she says, lies in its functionality – one can perform myriad functions on WeChat because of its “apps within an app” system. “These web-enabled, app-within-an-app official accounts are a breakthrough in messaging.”

But what really has the Valley folk in awe is WeChat’s eye-popping revenue-generating capacity. WeChat’s average revenue per user, or ARPU, is estimated at US$7 – seven times the ARPU of WhatsApp, the world’s largest messaging platform.

WeChat has an embedded portal called the “Wallet,” filled with pre-selected service providers that users can transact with after inputting their payment credentials. It is this Wallet feature about which Chan can hardly contain her excitement. “I cannot emphasise the importance of this Wallet enough. It’s the Trojan horse that allows WeChat to quickly onboard user payment credentials that then unlock new monetization opportunities for the entire ecosystem.”

It is so effective, in fact, that at least one in five WeChat users have tapped in their banking details and can spend on a wide menu of services whenever the whim or need strikes.

“Just imagine how many more transactions would occur on Facebook’s platform if more users linked their credit cards to Messenger, how much faster Pinterest’s buy-it button would take off, how much faster Snapchat users would move from sending cash to buying goods, and how many more Twitter users would pursue options to buy products,” says Chan.

In other words, just imagine how much more money the Western social networks could be making if they caught up with – indeed if they copied – the Chinese on mobile commerce.

One wonders what Carly Fiorina would think of Andreessen Horowitz’s description of the slackness of America’s big names of the Internet compared with their Chinese counterparts.

“In the US, we just don’t see the level of integration and frictionless mobile-first experiences we see in places like China through WeChat,” says Chan, before switching metaphors from Trojan horses to buffaloes.

“To put it bluntly: It’s like killing a buffalo and only using its skin for leather, as opposed to also using its meat, its milk, and more. In much the same way, most mobile experiences in the US remain at a superficial, surface-only level … without really harnessing all the parts of the phone, from GPS location to sensors to voice to camera.”

Well there you go. According to some in Silicon Valley, Zuckerberg is not sucking up, so much as catching up.

Cathy Holcombe is a Hong Kong-based financial writer