Shielding its share

Recently Starbucks ran a campaign on China’s most popular mobile messaging application WeChat asking its followers to signal their mood by messaging with an emoticon (if they selected the character of a smiley face, for example, it designated happiness). In response, it promised to send back an audio track of a song that matched.

But if Tencent, WeChat’s owner, were to send its own emoticon right now, it might well be a stressed-looking grimace. Why? Thanks to WeChat having signed up almost 400 million registered users (a good thing) it has become the prime target for almost all of its internet rivals (not such a good thing).

Let’s start with Sina, the operator of China’s biggest weibo service. In late August it announced the launch of WeMeet, a rival app. Like most mobile messaging services, WeMeet supports text, voice chat, location sharing and photo sharing. But to differentiate itself, it also added weibo and RSS feeds. Group chats aren’t restricted to friends only, either, allowing more contributors to join. Whether WeMeet has what it takes to become a major player is yet to be seen. But competition in the mobile messaging space is getting more intense. Two weeks ago, NetEase, an internet portal and online gaming site, launched its own product called Yixin, which means ‘easy text’ in Chinese.

Created in partnership with China Telecom, Yixin’s major selling point is that it can send free messages to handsets without the app needing to be installed on the receiving device. Yixin also supports voice messaging to landlines (it helps to have a partner like China Telecom, the country’s biggest fixed-line operator). This might attract the older-generation who may not be as tech-savvy. On the first day the app was launched, more than a million people downloaded it from Apple’s App Store in China.

Which of the two challengers looks most likely to knock WeChat off its stride? It’s hard to say at the moment as both have only just hit the market. But industry observers seem to agree that the new entrants have been designed to target some of WeChat’s weaknesses.

Lee Kai-fu, former head of Google China and now a weibo commentator with a huge following, still thinks it unlikely that the new services will pose a challenge to Tencent. “To give WeChat a sense of crisis, it’s not going to be a similar product. It’s also not going to be a product from a mobile carrier,” he told CBN.

Perhaps Lee had Xiaomi in mind as more of a threat? Although Xiaomi is better known for designing cheap smartphones, analysts think it might emerge as Tencent’s deadliest rival in mobile messaging. The smartphone maker released China’s first mobile messaging app (called MiLiao) back in 2010. But at the time it was much smaller and less well-known so its offering was quickly eclipsed by WeChat, which burst onto the scene the following year. But three years on, Xiaomi is planning a comeback by rejigging MiLiao (or ‘MiTalk’ outside China) and Huang Jiangji, head of MiLiao, told reporters that the new version will focus on becoming an “interest-based” community. Currently it has more than 500,000 micro-communities based on common interests like cooking or biking but Xiaomi says it plans to add more focused search and classification features to help users start, find or join these groups, says TechWeb, a technology blog.

But MiLiao’s biggest advantage is that the app comes preinstalled on Xiaomi’s phones. So the more phones that Xiaomi sells, the better MiLiao’s prospects. In the second quarter of this year, Xiaomi surpassed Apple to become the sixth-largest smartphone maker in China (see WiC205).

Xiaomi has expressed ambitions in the mobile games market too, an area that Tencent is also eager to tap. Analysys estimates that total revenue from mobile games in China reached Rmb5.5 billion ($898 million) last year and will race past Rmb10 billion this year. Small wonder, then, that Tencent, which dominates China’s online gaming sector, is anxious to make a move into games on mobile phones too.

Similar motivations explain search engine Baidu’s recent $1.9 billion acquisition of 91 Wireless, the most expensive deal yet in China’s internet industry. Industry observers say the takeover reflects Baidu’s desire to get into the world of mobile messaging. But it also has a lot to do with 91 Wireless’ skillset in mobile games, says Ken Xiao, chief executive of China Mobile Game & Entertainment Group.

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