WeChat is nothing like WhatsApp—and that makes it even more valuable

February 20, 2014
Obsession
Mobile Web
February 20, 2014
Tap image to zoom
Some people prefer both.(Quartz)

The world’s most popular messaging apps are mirror images of each other. WhatsApp, purchased by Facebook on Wednesday for $19 billion, prides itself on doing one thing well—offering a messaging service free of ads, games, and gimmicks. Its China-based competitor WeChat, owned by internet giant Tencent, strives to be everything at once: a platform for chatting, shopping, gaming, and even banking. Users can send a Lunar New Year’s “red envelope” of digital cash, buy a soda from a vending machine, book a doctor appointment or hail a taxi.

The comparison extends into politics and geography too: WeChat, like all social media in China, is heavily monitored by the government; WhatsApp, whose Ukrainian co-founder seems to have an anti-totalitarian bent, doesn’t even collect user information beyond a phone number. WeChat, with about 300 million users, is the most used-app for millions of Chinese users in the world’s biggest telecom market (where it’s known as Weixin) and is making inroads in southeast Asia and South Africa. In contrast, WhatsApp, with 450 million users, is strong in Western markets like the US, Europe, and emerging markets like Brazil, Mexico, and India.

chat

In terms of making money from its users, WeChat comes out on top, according to Chao Wang, an analyst with Nomura International in Hong Kong. In contrast to WhatsApp—whose main revenue source is an annual subscription fee of $1 after one free year of use—WeChat makes money by selling games and integrating online payment functions that encourage shopping through the app. “WhatsApp is kind of lagging,” Wang tells Quartz. “Even if WhatsApp’s user base is bigger, average users spend more time on WeChat.”

WeChat is expected to bring in 6.8 billion yuan ($1.1 billion) this year and about 40% more in 2015. According to estimates by Nomura, WeChat’s average revenue per user is $7 per user, compared to $1 per user on WhatsApp. And investors seem to appreciate the extra cash flow: analysts at Barclays estimate that WeChat is valued at about $30 billion as a standalone business, or about $95 per user, easily exceeding the $19 billion and $45 per user that Facebook paid for WhatsApp.

Already, the two have started to encroach on each other’s territories. As we’ve noted, WeChat has started expanding into the US, Europe, and Africa and last year launched a $200 million advertising campaign spanning Italy, India, South Africa, and Spain. And Facebook’s acquisition is a signal that it wants to tap into WhatsApp’s growing presence in countries like India and Brazil. Even fiercer competition between the two seems unavoidable, though WhatsApp faces particular challenges in China, where its new corporate parent is banned and WeChat has built a seemingly unassailable lead.

Moreover, unlike social media users that only choose one network, smartphone users may simply use both. “If I have two friends, one on WhatsApp and one on WeChat, I won’t ask one to switch,” Wang says. “Most likely, I will download the two apps on my phone.”

Read This Next: A hand-written note explains the radical purity driving WhatsApp’s success

Top News

Powered by WordPress.com VIP
Follow

Get every new post delivered to your Inbox.

Join 23,505 other followers