Features comparison:
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.
Identity database:
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.
Shake it:
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.
Wealth management:
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.
WeBank:
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.
Different demographics
One-child policy:
The first generation of Chinese internet users were born in the 1980s. Growing up in a country with a one-child policy, teenagers are more interested in making friends online, buying virtual items and playing online games.
Strict censorship:
China 4G users will reach 600 million by 2016, representing 42% of total mobile users. Subject to strict censorship, Chinese social platforms are skewed towards entertainment and consumption of services, but are relatively light on opinion.
Liberal internet culture rules in the West:
In the USA, freedom of speech, individualism and a liberal environment are important drivers behind internet culture. Facebook’s platform is designed for adult users who connect with their real-life social circle online.
Mobile momentum:
Chinese mobile messaging is more than double that of the USA. Tencent’s Weixin dominates the market with over 95% of China smartphone users using the app. It had 500 million monthly active users (MAU) at the end of 2014. Facebook Messenger had 500 million MAU.
Time spent:
Weixin users are heavy consumers, with more than 55% accessing the app over 10 times per day. Weixin, or WeChat outside of China, offers many more services than a simple social messaging app. It is a fully fledged, ever-growing social system with instant messaging, social media, mobile games, mobile payment, e-commerce and O2O functions, nicely integrated into one app.
Usage frequency:
Chinese social media users are more engaged than American users in general. A daily active Weixin user spends around one hour on Weixin on average versus 40 minutes for a Facebook user on Facebook.
Internet access:
Smartphones will drive China’s internet market. The mobile-internet market will be two to three times the size of the USA’s. China smartphone users are estimated to be 1.7x PC users, compared to 0.77x for the USA.
User age:
Facebook is more popular among female users, accounting for 55% of total users. Users on Facebook are older on average. It has more young (below 18 years old) and senior (over 50 years old) users than Weixin (55% vs 3%).