Analysis-Tencent places big bets on WeChat Channels to help build its TikTok.
By Josh Ye
HONG KONG, (Reuters) – The 90’s boy band Backstreet Boys climbed onto a Pennsylvania stage last summer and belted out their hits to 44 million people who tuned in from far away. This was for an online concert hosted in China by WeChat Channels.
Tencent, the owner of WeChat, hosted the show as one of many events to promote the app’s short video platform. Pony Ma, the founder of the tech giant, described the event as “the hope for the company”.
Tencent Holdings Ltd also tapped entertainers like Jay Chou from Taiwan and Westlife from Ireland for livestreamed concerts. According to a source, the team was set up to create a community of content creators in order to challenge ByteDance’s dominance in short-video.
Tencent hopes to turn Channels into WeChat Pay. It has a chance at it. It is going to be hard,” stated Liao Xuhua (a senior analyst at Analysys).
Within one year of its launch in 2013, WeChat Pay was the second-largest player on China’s mobile payments market, after Alipay, which is owned and managed by Jack Ma-founded Ant Group.
Two sources familiar from Tencent stated that Channels have been emphasized repeatedly within the company.
Tencent’s two year old platform has been a bright light in an otherwise dire 2022 where revenue for its other products such as games and payments services was severely affected by tighter gaming regulations.
Tencent announced this week that Channels saw more than three times the number of viewers last year.
Daily active creators, video uploads more that doubled
According to the company, gross merchandise value (GMV), which is calculated from livestreaming ecommerce where telegenic individuals sell goods online in realtime, has risen more than 800%.
It didn’t give absolute numbers.
LatePost reported that Channels’ daily sales transactions via livestreamed sales pitches exceeded 100 million yuan ($15million) in September 2022. This is an annual rate at 36 billion Yuan.
However, Douyin already had a plan to raise its GMV to above 1 trillion yuan ($155billion) by 2021. That’s six times more than the 2020 level, sources claimed at the time. Official GMV numbers are not disclosed by ByteDance.
PRODUCTS THAT INTEGRATE
Tencent has been integrating many products such as Tencent Meetings and WeChat Mini Program with Channels to allow creators to livestream content like the U.S. group Backstreet Boys.
Tencent Meetings, a Zoom-like teleconference platform, is available. Mini programs, which are similar to apps on Apple’s iOS or Google’s Android operating system but less data-intensive, can be run within WeChat.
Integrations allow podcast hosts to livestream a meeting on Meetings or conduct interviews on the podcast. A link can appear on the screen if the host recommends a product in chat. This will take viewers to a Mini Program, where they can purchase the product via WeChat Pay.
Tencent has also reduced the threshold to monetise Channels. Users with only 10 followers can now start making money via advertisements.
TikTok demands content creators have more than 10,000 followers before they can start monetising.
Channels has opened up new ad opportunities “like no other”, Li Yikai, general manger of Americas, EMEA and Europe at Nativex. WeChat only pushes a few ads per day.
“When you scroll and see an advertisement, you don’t stop to think about it. Li stated that you will see a lot more ads that have short videos.
Martin Lau, President of Tencent, stated that Channels’ advertising revenue is on track to surpass 1 billion Yuan by the end of the fourth quarter 2022.
Research firm Insider Intelligence figured that TikTok’s and Douyin’s combined ad revenue would exceed $30 billion by 2022.
Channels began to charge e-commerce merchants an additional 1% to 5% commission from this month.
Douyin has been charging between 1% and 10% since 2020.
RIVALRY
Channels may be Tencent’s best opportunity to catch up to ByteDance. However, some analysts believe Channels will struggle to reach the same size as Douyin (the Chinese version of TikTok).
“When you start as a social network app, then go into the short-video area, you must build an entire e-commerce system that supports it. Analysys’ Liao stated that while they won’t deny they can get there, it is very difficult.
Shawn Yang, the managing director of research firm Blue Lotus Capital Advisors is positive about Channels due to WeChat’s potential traffic.
WeChat is China’s most used chat app with more than one billion users.
“For example in Douyin and Kuaishou you won’t have the ability to ask your viewers to add me on WeChat. Yang stated that Channels allow you to add people quickly on WeChat.
He stated that this is a great benefit to people who already have private traffic on WeChat.
($1 = 6.7348 Chinese dollars)
(Reporting by Josh Ye, Editing by Brenda Goh & Himani Sarkar