Tencent WeChat wows mobile IM

Tencent's early success with WeChat, also known as Weixin, should help to assure its place as a leader in the fast-developing mobile Internet space.

PUBLISHED : Thursday, 13 September, 2012, 12:14pm
UPDATED : Thursday, 13 September, 2012, 3:01pm

The fight for dominance in of China's mobile Internet is producing some interesting global shifts, with big names like Baidu (Nasdaq: BIDU) and Alibaba facing aggressive, younger competitors as they try to translate their dominance of the older desktop Internet to the mobile space that will become a key growth driver in the next decade. But one company that seems on track to maintain its dominance is Tencent (0700.HK), China's largest Internet company by market value, which rose to prominence a decade ago with its highly popular QQ instant messaging product. Now it seems that Tencent's mobile instant messaging product WeChat, better known by its Chinese name of Weixin, is facing little or no opposition in its rapid rise to become China's dominant mobile IM product. 

Tencent's media shy founder Pony Ma disclosed at an event in Beijing this week that WeChat is on track to have some 200 million users by the end of this month, meaning that an impressive one-fifth of China's 1 billion mobile users will be using the chatty product on their mobile phones. That number is one of the few I've seen that comes close to approaching the 300 million registered accounts for Sina's (Nasdaq: SINA) hugely popular Weibo, whose Twitter-like service also dominates microblogging in China.

I can personally attest to the huge popularity of WeChat, as most of my friends in Shanghai have the application loaded on their phones and are also quite active users. WeChat's rapid rise comes on the back of a very well-developed product, one of Tencent's specialties. WeChat's mobile-based instant messaging allows users to chat with each other over the mobile Internet, allowing them to save money by circumventing more expensive traditional text messaging services -- an important feature for Tencent's traditional users who tend to be younger and thus more cost-sensitive. WeChat is also more functional than traditional SMS, allowing users to do things like send voice messages and locate other WeChat users nearby simply by shaking their phones.

This kind of early dominance of the mobile instant messaging space is key for Tencent, which could use its huge mobile Internet presence to build up businesses in other areas. The company previously performed this tric in the desktop space, leveraging its early dominance with QQ to later become China's biggest online game operator, overtaking older, more established rivals like Shanda (Nasdaq: GAME), NetEase (Nasdaq: NTES) and The9 (Nasdaq: NCTY). I could easily see Tencent using WeChat to once again build up its presence in mobile gaming, helping it to dominate this big growth area where an industry leader has yet to emerge.

Tencent's early dominance in mobile instant messaging contrasts sharply with Baidu and Alibaba, which dominate the online search and e-commerce markets for desktop Internet, respectively, but are facing stiffer competition from a number of well-funded rivals in trying to translate that dominance to the mobile space. While it's still too early to predict who will become China's big players in the fast-developing mobile Internet market, Tencent does seem to have a good head start over many of its rivals based on the early and rapid success of WeChat.

Bottom line: Tencent's early success with Wechat, also known as weixin, should help to assure its place as a leader in the fast-developing mobile Internet space.

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