Tencent’s Weixin/Mobile QQ has evolved into a more powerful and comprehensive social platform than its peers. Its innovative product offerings include mobile games, e-commerce, online-to-offline services (O2O) and e-finance, increasing its user reach, stickiness and revenue streams.
Facebook’s strategic advantage is centred on its identities that are at scale with connectivity. Identities are driving the most advanced targeting technologies that allow advertisers to precisely attract targeted consumer groups and increase advertisers’ return on investment.
Asia leads global gaming growth:
Asia has led global gaming growth given superior telecom infrastructure and high mobile adoption and spending. Tencent is more a game developer, operator and publisher while Facebook is predominantly a game-advertising platform.
Tencent dominates China’s gaming market with over 40% share on PC and mobile. It distributes half of China’s top-10 mobile games. Four new mid-core titles have topped iOS’s grossing charts: Blade of Three Kingdoms in November 2014, The Legend of Sword and Fairy in December 2014, I am MT2 in January 2015 and WeFire in February 2015. Mid-core games can attract more paying users and boost Arpu.
Facebook’s sponsored feeds are heavily skewed towards mobile games, accounting for about 60% of total ads and even higher by revenue.
Weixin and Mobile QQ are the largest mobile-game distribution platforms in China, accounting for over 40% of mobile-gaming revenue. Ad revenue should grow 50 60% on new inventory from Weixin, Qzone and video platforms.
Making life easier:
The online-to-offline (O2O) e-commerce model finds consumers online and coaxes them into real-world stores. It is a combination of payment model and foot-traffic generator for merchants as well as a discovery mechanism for consumers that creates offline purchases. Tencent leads O2O and location-based services among its peers. Users can pay utilities bills, collect offline coupons, search for nearby restaurants, purchase group-buy products, book movie/show tickets all on Weixin/Mobile QQ.
Simple to use:
Facebook’s O2O and location-based services products are based on enterprise accounts, but the functionalities are relatively simple. Users can search for nearby merchants’ Facebook accounts (restaurants, coffee houses, hotels and shopping) and nearby events. While users’ comments/reviews are useful, Facebook only offers promotional information instead of direct products and services like Weixin/Mobile QQ. Some merchants, however, offer discounts if users “like” their enterprise account page.
The “shakes” function on Weixin/Mobile QQ could become an entry gateway for O2O services. For example, Tencent has partnered with TV stations to promote content and launched joint interactive activities. In addition, users can use the shakes function to receive messages from nearby merchants. When users shake their phone with their TV on, they can
West lags behind:
Tencent is China’s second-largest online-payment network, with 20% market share and more than 100 million active users on mobile. Facebook lags behind in providing e-finance products given the well-established financial system and more stringent regulatory environment in the USA. But Facebook is catching up; it shares 30% of payment revenue for the in-game virtual items purchase on its PC platform.
Tencent with Sinolink Securities to launch Yongjinbao (佣金宝), a combined wealth-management product which offers low commission rates for online trading (0.025%) and money-market rates for unused capital.
Tencent has a private-bank licence “WeBank” and a credit-bureau licence which will enable it to launch more e-finance products on Weixin/Mobile QQ. Weibo has also launched its payment service based on Alipay’s infrastructure which can be used for its Weimai and gaming platform.
We hosted a conference call with leading Facebook ad agency AdParlor to review ad-spending trends in 1Q15.