Chinese super app WeChat gets bigger and more profitable as it takes on TikTok in short videos and lures ad dollars

WeChat’s short video service Channels brought in US$411.5 million in ad revenue in the second quarter as the app’s monthly users hit 1.327 billion
Tencent is pinning its hopes on Channels as a major new revenue driver as it ramps up monetisation efforts on the platform

Tencent

Iris Dengin Shenzhen

Published: 5:00pm, 17 Aug 2023

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China’s super app WeChat continues to get bigger and more profitable as its TikTok-like short video function generates strong advertising revenue and e-commerce sales, according to the latest data released by the app’s owner Tencent Holdings.

The social media app, which started as an instant messaging tool in 2011, has gradually become an all-in-one platform for Chinese smartphone users.

Tencent said on Wednesday that monthly active users of WeChat and Weixin – the terms the company uses to refer to accounts outside and inside mainland China, respectively – reached 1.327 billion by the end of June, up from 1.319 billion three months earlier. Tencent did not provide a breakdown of domestic and overseas users, although it is widely estimated that the vast majority of users are in China.

In the second quarter, time spent on WeChat Channels – the name of the short video service that competes with ByteDance’s Douyin, the Chinese version of TikTok – almost doubled year on year, aided by double-digit growth in daily active users, Tencent president Martin Lau Chi-ping, said in a conference call with analysts on Wednesday.

As Tencent has successfully attracted users to spend more time on short videos, the social media giant has sought to better monetise that attention.

Channels, internally referred to as Video Accounts, contributed 3 billion yuan (US$411.5 million) in advertising revenue in the second quarter, making it a main driver of its 34 per cent ad sales growth.

The ad load on Channels remains “a tiny fraction” of that found on rival short video platforms, but Tencent will “progressively enhance our ad load and that translates mechanically into more revenue”, James Mitchell, Tencent’s chief strategy officer, said in the earnings call.

Live-streaming e-commerce is another potential avenue for further monetisation of Channels, as other short video platforms generate around half of their advertising revenue from companies selling through their video feeds, Mitchell said.

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WeChat’s gross merchandise volume from live-streaming e-commerce grew 150 per cent in the second quarter compared with a low base a year earlier, the company said.

On Wednesday, Tencent reported an 11 per cent increase in revenue for the second quarter, reaching 149.2 billion yuan, missing analyst estimates. Its 26.2 billion yuan in profit for the quarter was also below estimates, but it was up 41 per cent from the same period a year ago.

Channels, which has been labelled a beta product since its launch in January 2020, was called Tencent’s new hope by the company’s founder and CEO Pony Ma Huateng in an internal meeting last month, as the company looks for new growth engines amid economic headwinds.

While the firm has not disclosed its current number of short video users, monthly active users on Channels were estimated to have reached 813 million last June, ahead of the 680 million on Douyin and the 390 million on Kuaishou during the same month, according to data analytics firm QuestMobile.

Tencent has been gradually introducing multiple monetisation schemes to Channels, including paid subscriptions, paid live streams, and live-streaming e-commerce, from which the Shenzhen-based firm extracts a commission.

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