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Can WeChat Thrive in the United States?

Though the messaging app dominates in China, few Americans have even heard of it.
August 11, 2017
Nishant Choksi

Some of America’s most formidable technology companies have headed to China. Once they got there, their superpowers seemed to vanish. Uber, Amazon, and Apple are just a few examples of firms that have been humbled by the Chinese market. It may be tempting to blame Chinese censorship or government restrictions. But that wouldn’t explain why the reverse is also true: China's superstar companies also struggle to make it in the United States. 

There may be no better example than Tencent’s WeChat, the mobile messaging and payment app that has over 900 million monthly active users. Foreigners who visit China are awestruck by the complete dominance of this super app, which people use for everything from sending messages to hailing taxis to buying real estate. WeChat has millions of verified official accounts—including brands, celebrities, even hospitals—that can receive mobile payments using its network. For many Chinese, WeChat is a wallet and communication platform, and it’s impossible to imagine life without it.

In 2013, Tencent announced that it was opening an office in the United States with the aim of bringing WeChat to America. Having enjoyed success in its home market, seeking growth abroad was a natural next step. The company also saw an opportunity: there were already messaging apps in the U.S. market, but none had taken the country by storm. There seemed to be room for WeChat to shake things up, but that’s not what happened. Today how many Americans, aside from the ones with connections to China, have even heard of the product? 

Tencent declined to comment on WeChat’s international expansion, but it seems fair to say that WeChat is not yet the global player Tencent hoped it would be. In 2013, Tencent enlisted soccer star Lionel Messi to advertise the brand in television and online. Yet its strong push in countries like Indonesia, India, and Brazil were not a smashing success. Chinese state media Xinhua has reported that other than in Malaysia, where it has become the messaging app of choice, WeChat users elsewhere are mainly ethnic Chinese. The same article quotes Tencent founder Pony Ma acknowledging the company’s difficulty in expanding overseas. WeChat is not among the top five iOS apps in Indonesia, India, Brazil, or other key markets, according to Bloomberg.

It’s no secret that China has a heavily censored Internet, and that WeChat is a heavily censored product. This can make international expansion confusing at best: sensitive content on international accounts might be blocked in China. But censorship does not appear to be the main obstacle preventing WeChat from catching on in the U.S., at least for now. Rather, WeChat faces the same network-effect challenges that American companies encounter in China. Facebook is currently blocked in China, a factor that certainly contributed to WeChat’s success. Now, if Facebook were to make it in, it would find that everyone is already on WeChat. The two products are different, of course, but WeChat works so well in China precisely because so many Chinese people are on it. Users’ favorite brands and celebrities are there, as are friends, family, and co-workers. Facebook would have a nearly impossible time replicating that kind of network.

Network effects are only part of the story. WeChat was designed for a Chinese market. Connie Chan, a partner at Andreessen Horowitz, wrote the 2015 article “When One App Rules Them All,” arguably the definitive piece on WeChat. Chan says that when WeChat was launched in 2011, Chinese people had no universal way to communicate. E-mail penetration was low. SMS and voice plans were relatively expensive, and SMS spam was a serious problem. Tencent’s own QQ instant messaging platform was popular, but it was designed for the Web at a time when smartphones were taking off. By the end of 2015, more than half of China’s population was online, with 90 percent accessing the Web by smartphone.

This was very different from the environment that Tencent encountered in the United States around 2013, when the company was first trying to bring WeChat here. People already had Facebook, WhatsApp, and iMessage, as well as e-mail and many other ways to communicate. Chan explains, “there was less of a strong need to have this one unifying platform for everyone.”

Today, WeChat might be best described as a payment app with a messaging function. Last year China’s mobile payments reached over $5.5 trillion, roughly 50 times the size of America’s market. In the first quarter of 2017, WeChat Pay accounted for 40 percent of the Chinese mobile payments market. After providing their bank details, WeChat users can scan their QR codes to pay for most about everything. It works well because so many Chinese merchants and consumers are payment-enabled.

WeChat Pay is now operating in the United States, but not for the average American consumer. While Americans in the United States can create WeChat accounts, they can’t link them to their banks, so they are missing out on a crucial function. WeChat's wallet function is not yet available to users whose accounts are registered in the United States. American sellers who register as WeChat merchants will be able to accept payment from Chinese tourists and students.

Silicon Valley-based Citcon provides hardware, a free API, and customer service to U.S. vendors who are willing to take WeChat or Alipay payments from Chinese customers. Chinese tourists simply have to take out their mobile phone and scan their QR code to pay merchants from their WeChat accounts. WeChat Pay’s U.S. expansion makes perfect sense. Tencent can keep traveling users on their platform while tapping into a very lucrative market. Chinese outbound tourism spending reached over $260 billion last year, according to the World Tourism Organization, and there were hundreds of thousands of Chinese students in the United States. Citcon says that it is already working with around 300 merchants including hotels, airports, museums, restaurants, and amusement parks. 

Just this week, Caesars Entertainment launched a WeChat digital payment program in Las Vegas, allowing Chinese tourists to use WeChat Pay at its restaurants, retail shops, and box offices. Claire Yang, director of international marketing at Caesars Entertainment, says that Chinese customers make up a big part of their business, and an inability to accept WeChat Pay was resulting in lost sales. On the first day of the WeChat Pay launch, Chinese customers were happy to learn that they could now use their preferred form of payment. Yang said that WeChat transactions were particularly popular at the Bacchanal Buffet in Las Vegas. She described the Bacchanal register on the day of the launch: “People are pulling out their phones and showing QR codes and saying, I want to pay with WeChat Pay. And I feel like I’m back in China.”

Wei Jiang, president of Citcon, says WeChat Pay is good for merchants, too. Customers don’t need to insert or swipe a credit card, and there are no passcodes to enter. “It is 50 percent faster than using a credit card,” Wei says. Another U.S. firm, the payment processor Stripe, has also announced a deal with Alipay and WeChat Pay. 

If mobile payments are so easy, why aren’t any American mobile payment options as successful as WeChat is in China? Credit cards are a big reason. Wei, who spent seven years working at Visa, reiterates that products like WeChat were designed for China, where credit-card penetration is still relatively low. In China, WeChat was able to leapfrog credit cards and go straight to mobile payments, and now is helping to transform much of urban China into a largely cashless society. 

It’s too soon to say that WeChat has failed in the U.S. Even if Americans don’t have WeChat on their phones, the product can still have an impact. Like Alibaba, which is trying to convince American businesses to use their platform to sell products to China (see “Can China and the Internet Save American Small Business?”), WeChat is trying to lure U.S. merchants with the promise of China’s enormous consumer market. WeChat is influencing U.S. products in other ways as well. SnapChat's adoption of QR codes, for example, appears to be inspired by the Chinese company.

But Tencent has much greater ambitions. Chan says that companies like Alibaba and Tencent “want to be compared to Facebook, Google, and Amazon. They want to be in that same conversation.” Chan notes that the market caps for Alibaba and Tencent are each over $390 billion. “From that perspective they have the capital to go overseas and purchase things, or invest in things, or try more experiments.”

You don’t always need all that capital to make waves abroad, however. Sometimes you just have to prioritize an overseas market. One of the more successful examples of a global, Chinese-based product is, a social lip-syncing app. When the team saw how many U.S. users were downloading the app, they decided to focus all their attention on that market. The hit app attracted millions of users worldwide. Many of the American middle-schoolers using the app probably have no idea that the company is based in Shanghai. 

WeChat’s overseas challenge may be tied to its success in China, and the fact that it was perfectly engineered to meet China’s unique consumer needs. As American companies have learned in China, products that work well at home sometimes get lost in translation.

Emily Parker has covered China for the Wall Street Journal and been an advisor in the U.S. State Department. She is the author of Now I Know Who My Comrades Are: Voices from the Internet Underground.

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