MESSAGING WARS

WeChat is taking on one of WhatsApp’s most dominant markets in the world

Obsession
Mobile Web
Quartz africa
Obsession
Mobile Web
Quartz africa

WeChat, China’s most popular messaging platform, is hoping to replicate its success at home in Africa—by becoming the internet.

The app has become core to the Chinese social fabric, with 650 million monthly users, the majority of them in China, and 93% penetration in its major cities. Users can order taxis, pay bills, find dates, invest in money market funds, get personal loans, and a dizzying array of other services (more than 10 million third party apps). For WeChat, messaging is the tip of the spear into a mobile platform users never need to leave. Now its sights are set on a continent of a billion people who are rapidly going online via their phones.

“We’re stuck in an extremely aggressive, competitive environment, very fast-growing, very difficult to differentiate oneself. So what we’ve done in [South Africa]—and we are replicating this in other African countries as well—is focus on the power of the platform,” WeChat Africa head Brett Loubser tells Quartz. He says his mission is to make the app the “central point of control” of a person’s day-to-day life by offering transactions and e-commerce as well as a serving as a second screen for interacting with popular television shows.

 WhatsApp had a higher penetration rate in South Africa than anywhere else in the world. For now, WeChat is focused on South Africa where it has a potential advantage. WeChat Africa is a joint venture between Chinese internet giant Tencent and South Africa’s media behemoth, Naspers, which also owns MultiChoice, South Africa’s satellite television monopoly (holding 95% market share of the pay TV market), as well as a whole host of e-commerce companies. It gets even more intertwined: Naspers rides the Johannesburg Stock Exchange on its 34% stake in Tencent, with its share price largely dependent on Tencent’s success.

Still, even in what is a home market of sorts, WeChat faces an uphill battle. With SMS still very expensive in South Africa, WhatsApp adoption has been fast and fierce. WhatsApp had a higher penetration rate in South Africa than anywhere else in the world by 2014, with 10 million users compared to WeChat’s estimated five million, according to South African data research house World Wide Worx. Even Mxit, South Africa’s homegrown chat app, shut down earlier this year and donated its IP to a non-profit. (Naspers exited its stake in 2011).

In Cape Town’s startup scene, it’s rare to find someone who uses WeChat. When I downloaded it and logged in the first time, the first and only message I got was from an old colleague now in Beijing asking if I’d moved to China. An anecdotal survey of young South African techies from townships, all of whom regularly communicate on WhatsApp and Facebook, showed that WeChat was too complicated and hard to use.

“Everyone downloaded it when it came out, but it just didn’t stick. And if no one else is using it, what’s the point?” said Pholisa Fatyela, a 23 year-old apprentice programmer from Khayelitsha. Even the relatively good compression rate for video, always an issue in a country where mobile data is still very expensive, didn’t tempt them.

 “Everyone downloaded it when it came out, but it just didn’t stick. If no one else is using it, what’s the point?”  But Loubser says WeChat is actually about reducing complexity in a market full of new internet users, by offering many services through one interface and one wallet, instead of users having to adjust to many apps with all different user experiences. “WhatsApp is extremely dominant. So to take that on head to head you need specific ammunition. We focus on providing immediate differentiation and real value. Once people are in-platform because there’s something valuable that enhances their life, they tend to use messaging anyway.”

So besides serving as a voting utility for reality TV shows on MultiChoice like Idol and Big Brother, WeChat also just announced a 50 million rand ($3.5 million) seed fund for local startups to provide offline services via WeChat such as micro-jobbing service M4Jam (Money for Jam) and delivery service Picup.

But the most important move is the launch of WeChat’s mobile money services in Africa. In South Africa, they’ve teamed up with Standard Bank, one of South Africa’s Big Five banks that happens to be backed by ICBC, China’s largest lender by assets. While most “mobile wallets” are just payment features on a specific banks’ app, the WeChat Wallet is closer to a real physical wallet. Users can store cash as well as connect their debit and credit cards. They can withdraw real cash at any Standard Bank ATM, even if their account is with another bank, and even if they have no bank account at all. It’s also integrated with popular local mobile payment app Snapscan (also owned by Standard Bank).

One of the biggest challenges facing mobile money in Africa is that few platforms link up, across borders and across banks. None of the continent’s major mobile money services have cracked the South African market yet. (Even the poor have ready access to bank accounts compared to other African countries, and it’s fairly easy to use the country’s domestic wiring system of electronic funds transfer). If WeChat can become an agnostic platform for money transfer, deposit and retrieval, it could begin to make inroads into Africa and compete with the likes of M-Pesa or Airtel Money.

It still has a long way to go. Even though WeChat has a team on the ground in Nigeria, and recently partnered with two Nigerian startups to launch on its platform, it still has just 3.4 million users in a country of 173 million, according to SocialBakers. WeChat refuses to give specific numbers around users and user growth anywhere on the continent.

Overall, WeChat Africa is following a strategy familiar in Silicon Valley: get the users first and worry about the revenue later. WeChat Wallet does charge transaction fees, but Loubser says they are in “growth phase,” and have made no revenue so far. Plans include localizing a key revenue driver in China: virtual goods. What virtual goods a cash-strapped continent would go for remains to be seen, though he pointed to a big market for ringtones and wallpapers on feature phones as a proof that the behavior does exist in Africa.

Loubser emphasizes that WeChat has only been in Africa for two years, and WeChat is playing the long game. “It’s early days. Who knows where WhatsApp was two years in. We’re only at the very start of the message-driven revolution.”

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