The Next Silicon Valley

Can WeChat?

With half a billion users, this Chinese social network is poised to overtake Facebook. Will Americans join the conversation?

WeChat app
WeChat has the same kind of world-conquering hubris as Facebook.

Logo by Tencent Inc.

Modern China, in some sense, was born in the southern city of Shenzhen. Located just across the bay from Hong Kong, Shenzhen was once literally on the border between communism and capitalism. It was there, in 1979, that Deng Xiaoping set up China’s first “special economic zone.” In 1992, Deng stopped in the city on his famous “southern tour,” when he made the case for continuing China’s market reforms in the wake of the Tiananmen Square massacre.

Today, the city of more than 10 million people is known as a high-tech manufacturing hub. Most famously (or infamously), it’s where Taiwanese company Foxconn manufactures many of Apple’s best-selling products. But today, the best reason to keep an eye on the city is that it’s the home base of Tencent Holdings Limited, which has a good shot at becoming China’s first globally known Internet brand.

China has long been an attractive if elusive target for Western technology firms—home to nearly 600 million Internet users but also an authoritarian government and lax intellectual property enforcement. The frustrating attempts of companies like Google and Facebook to set up shop in China have been exhaustively covered. But less attention has been paid to whether American Internet users will ever adopt products developed in China.

Tencent is betting that they will, and announced earlier this year that it is opening a U.S. office for its popular WeChat social networking program, a move based on the proposition that the world’s third-largest Internet company might be offering some services that Americans are interested in.

One reason Chinese Internet firms don’t have a particularly high profile in the U.S. is that they’re not offering anything all that different from what Americans already have. With more than 50 million users, the Chinese microblogging platform Sina Weibo works roughly along the same lines as Twitter. China’s leading search engine, Baidu, resembles Google down to its homepage design and font selection. Both sites have benefited to some extent from the fact that their American analogs aren’t available in China: Twitter and Facebook are blocked entirely by the country’s great firewall; Google decided to pull out of China in 2010 and searches on the site today are redirected through Hong Kong, where there are fewer restrictions. In practice, Google isn’t banned, but in the mainland it’s often slow and unreliable. (To be fair to Baidu, the Beijing-based company was establishing itself as the country’s dominant search engine even before Google’s decision.)

So what makes Tencent different? Founded in 1998 and based in the southern city of Shenzhen, Tencent’s best-known product is QQ, a mobile instant-messaging service. It also runs an increasingly popular search engine called SoSo. But outside China, Tencent’s best-known product is WeChat, which is eroding the popularity of Sina Weibo within China and appears to be well on its way to establishing itself as China’s first global internet brand.  

WeChat combines the chat features of programs such as WhatsApp and Snapchat, the social-networking functions of Facebook, and the photo-sharing abilities of Instagram with a cutesy aesthetic and features like “stickers” that seem to be a hit with users. In other words, it has the same kind of world-conquering hubris as Facebook. Designed specifically with mobile phones in mind, WeChat may also have a leg up as phones rapidly increase their share of global Internet traffic.

Like its American counterparts, WeChat has been slow to monetize its monumental growth, but apps, games, and “stickers” for your profile are available for sale within the program and a mobile payment system was recently introduced. Last week, Tencent announced a new service allowing users to link their bank cards to their WeChat accounts, allowing them to deposit money directly into a PayPal-like payment system run, naturally, by Tencent. This move puts Tencent in competition with Baidu and e-commerce giant Alibaba, which also have their own financial service platforms. 

WeChat already dwarfs its competitors in terms of audience, with more than 500 million users, 100 million of them outside of China. It’s available in eight languages, Argentine soccer star Lionel Messi has signed on as the company’s global spokesman, and it’s now the fifth most downloaded smartphone app in the world (after Google Maps, Facebook, YouTube, and Google Plus).

WeChat isn’t unheard of in the United States—the New York Times reported a year ago that it had signed up 100,000 U.S. users in just a month—but its name recognition is still low, particularly among those who don’t have friends or relatives to communicate with in China. In fact, research agency Millward Brown recently reported that 94 percent of Americans couldn’t name any Chinese brands.

As always with these two countries, politics may come into play. Essentially all Chinese Internet services are censored to a certain extent, so it shouldn’t come as any great surprise that terms such as “Falun Gong” have been censored on the network within China in the past. Anti-government dissidents within China have also reported having their accounts shut down or noticing obvious evidence that their communications are being monitored.

This raises some trickier issues as Tencent attempts to expand WeChat into global markets. In January of this year, the blog Tech in Asia reported that the phrase “Southern Weekend,” an independent-minded Guangzhou-based newspaper then locked in a dispute with the Chinese government, was being censored on WeChat not just within China but globally. (The phrase was later restored, and Tencent blamed it on a “technical glitch.”)

It’s worth keeping in mind that the vast majority of WeChat users are likely unbothered by the fact that it’s not the most appropriate venue for discussions of Falun Gong or the Tiananmen Square massacre. The prospect of Chinese government monitoring may hurt WeChat’s prospects in the United States, but for other countries in a post–Edward Snowden world, Facebook and Google might not necessarily be viewed as more secure. U.S. tech companies looking to maintain their market share in places like Brazil, Mexico, and India probably don’t want to be in the position of arguing that chatting with your friends under U.S. government surveillance is preferable to doing it under Chinese government surveillance.  

A centrally planned economy still supervised by an authoritarian party designed along Leninist lines might not seem like the best atmosphere for innovation, but things could be starting to change. China’s leaders have made clear that they want the country’s economic emphasis to shift from heavy industry to consumer goods and high-tech innovation. In addition to big players like Tencent, Baidu, and Weibo, China is even beginning to develop something of a startup culture, centered in Beijing’s Zhongguancun district.

Whether WeChat’s explosive growth is a short-lived bubble or something more permanent could be a bellwether for China’s technology sector, an industry that has been criticized in the past for focusing too heavily on making local clones of popular international products. Whether or not WeChat is the Facebook killer Tencent hopes it will be, its explosive global growth is a sign that China’s entrepreneurs are starting to crack the code of what the world’s Internet users are looking for.