Separation anxiety

Problems at Weimob brought disruption for its mini-program clients

How much is Covid-19 going to cost the world’s economy? As much as $2.7 trillion, according to analysts at Bloomberg Economics. That number factors in production halts, curbs to international travel, plunging retail sales and routs in stock markets and commodity values.

To broaden the answer, the calculation could also include the costs of mental illnesses triggered by protracted quarantines and cases of self-isolation. A survey by the Chinese Psychological Society found that 43% of 18,000 respondents had suffered anxiety as a result of the outbreak; and some 22% of a 5,000-person cohort were exhibiting symptoms of post-traumatic stress.

Cases of psychological strain can be costly. An example: Weimob, a cloud-based developer that helps companies operate stores within Tencent’s flagship app WeChat, saw HK$3 billion ($390 million) wiped off its market capitalisation because of an employee frustrated at being stuck at home.

On February 23, the Shanghai-based business received reports about widespread disruption of its in-app services on WeChat. It soon discovered that the breakdown was linked to a staffer at its maintenance and operations department, who had “deliberately sabotaged” its production servers and databases. It wasn’t until March 3 that the data was successfully recovered, allowing Weimob to return its services on the WeChat platform back to health.

“According to a police investigation, the employee has been mired in online loans and had [tried to] commit suicide before,” Sun Taoyong, Weimob’s chairman and CEO, announced in a notice. “Due to the epidemic he did not return home to celebrate Spring Festival, nor could he roam freely in the city. He has been stuck in his room alone for more than 30 days.” The unnamed employee has been arrested.

To compensate the merchants affected by the disruption, which number several million, the Hong Kong-listed firm immediately established a Rmb150 million compensation fund, with senior management contributing a third of the cash from their own pockets.

The outage came at a time when WeChat’s mini-program services had been experiencing an explosive increase in usage. Widespread quarantining has seen businesses scrambling to shift more of their operations online. Mobile office applications also saw active users multiply by almost five times in the first two weeks of February compared to a month earlier as more people work from home (see WiC486).

Many retailers have refocused on in-app virtual stores on WeChat, a social media network that offers access to more than 80% of the country’s population. As of February 14, traffic to WeChat’s in-app supermarkets had increased by 1.15 times. Traffic for fresh fruit and vegetable outlets was up 1.68 times. In-app e-commerce as a whole recorded an 83% year-on-year growth in traffic, according to Tencent.

The surge in activity is expected to lift the volume of transactions made through WeChat’s mini-programs, which had already reached Rmb800 billion of sales in 2019 (160% year-on-year growth). Reliance on these applications that function within WeChat has become a part of everyday life in China, where people access a wide array of services including ride-hailing, food delivery and travel booking on dedicated channels inside the app. There are now more than 300 million daily active users from a menu of more than two million mini-program choices.

The growing pie has prompted Tencent’s archrival Alibaba to launch a similar service, which it has been positioning as a response to the coronavirus crisis.

More than 1,200 developers have already devised 181 mini-programs for Ant Financial’s Alipay payment tool, the company said, with “contactless” solutions for “grocery deliveries, legal and medical advice, logistics, and public services.”

Targeting 100 million small merchants, Alipay also says its offering is different from WeChat’s. “Our mini-program service will provide more functions to meet SME demands in user management, payments and financing,” He Yongming, vice president of Alipay’s open ecosystem business, told Bloomberg.

Meanwhile, Weimob’s stock has rebounded from the worst of its lows when the disruption was being reported in the news. In fact, some investors saw the 37% pullback in its share price between February 25 and March 16 as a buying opportunity, based on the broader uptrend in mini-program activity. The company’s software-as-a-service business logged 41% growth in revenues to Rmb219 million in the first half of 2019, and gross profit increased 35% to Rmb177 million.

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