Extra Buzz 001: It's Always Beta at WeChat

Jan 18

Helloooooo Techbuzzers!

Welcome to the inaugural edition of Tech Buzz China Extra Buzz! It’s meant to supplement the podcast in our weeks off so you can get even smarter about China tech, to provide a place where you can meet other investors, entrepreneurs and operators, and of course, interact with us more easily than a podcast format allowed (just reply to this email with your comments and questions!).

We’ll be experimenting with the format a bit, just like we did in the beginning of the podcast, but the aims will be similar – to provide an independent and thoughtful analysis and opinion pieces on headline news in China tech, and to do so complete with the cultural, social and economic background and context that we think you need to really make sense of what’s becoming an increasingly complex and sophisticated ecosystem. We hope you enjoy reading it as much as we enjoy writing it!

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Thank You!

Rui & Ying

ALLEN ZHANG: IT’S “ALWAYS BETA” AT WECHAT

CONTENT DIVERSIFICATION AND MINI PROGRAM UPGRADES AT THE FORE

Reading Time: 10 minutes (~2800 words)

Relevant Tech Buzz China Episodes:

Summary

WeChat had its 6th Open Class PRO (its annual developers’ conference) in Guangzhou on Jan. 9, 2020. Last year, if you’ll remember, WeChat creator Allen Zhang spoke on stage for four hours (!). This year, he only sent in a 12-minute pre-recorded video (transcript), much to the disappointment of attendees. However, I found it to be an important and succinct distillation of WeChat’s direction for the upcoming months, which should be of great interest to any of you investing in or doing business in or near Chinese digital media, which is now leading the charge in terms of exporting interesting consumer internet business models all over the world. There’s also some interesting tidbits that may affect search and enterprise (communications) software that we touch on briefly, topics that I’m sure we’ll be returning to in future editions.

Overall, I continue to be a fan of Allen’s product vision, even though it’s true WeChat doesn’t always play nice, but they are still more open than many other platforms. And while I don’t think he speaks for or is even representative of the thinking amongst most Chinese internet entrepreneurs, his perspective is often different and thus refreshing.

ALLEN-OSOPHY: WHAT DOES IT MEAN TO BE A PLATFORM?

Unlike here in the West, which tends to think of openness as the greatest good that a platform can deliver, Allen singles out breadth / diversity and quality of the content on a platform as its core responsibilities. Paraphrasing here, but he says that “a person’s world used to be how far they can walk, but now it is the breadth (and the quality) of information they acquire,” because “what you see / read determine what kind of person you are and the thoughts you’ll have.” Allen’s long been known more as a humanistic philosopher-creator (my words) than as a cunning businessman, and in fact, it was his insistence on protecting the user experience that prevented WeChat from being overrun with ads like many of his competitors.

That’s been frustrating for investors, but as a user, it’s been a great relief. In any case, I found myself nodding in agreement to his argument that the platform does not play as passive a role in a user’s information acquisition as many Western companies would claim. The core functionality of WeChat is communications, which means that it pushes you messages. In addition to messages from your personal contacts, a good portion of the rest are from Official Accounts you subscribed to, or others subscribed to and are forwarding within the system, all of which are, in aggregate, the information “shaping your world.” Thus, the rules WeChat imposes on the way this information can be pushed to the user absolutely does and actively affects the user’s life and reality. As he’s often fond of saying, “push (notifications / messages) has changed the world, because it’s made users lazier.” Allen even went as far as to say that he does not like to use the verb “distribute” to refer to WeChat’s capabilities when it comes to disseminating content; it’s “more respectful,” he thinks, to use “recommend,” because that’s really what the software is doing, directly and indirectly.

As a very minor but still telling example, because Allen takes the user experience rather seriously, he’s been slow to open up the WeChat friends maximum of 5,000 despite there being a good number of users (abt 1mm) who’ve hit the limit and clamored for the change. It would have been an easy change to the code, but Allen wanted to think through the impact to users. Presumably, most such heavy users of WeChat don’t actually have 5,000 close friends, but are rather using it for business purposes. Thus, their Moments posts may be more promotional than authentic personal posts. To prevent users’ feeds from being even more overrun with such content than they are already, new WeChat adds beyond 5,000 are restricted to chat only, without access to Moments.

*By the way, I am one of those who hit the old limit early, feel free to add me “missruima” but do note that you are a subscriber to Extra Buzz if so!

OK, BUT BYTEDANCE?

Now there might be some of you more cynical than me and thinking, well, Allen’s words sound good and all, but what are the underlying business motivations? Surely there must be some practical implications beyond these pretty but ultimately vague words about how thoughtful WeChat is about affecting the lives of its users. Well, first of all, there’s the simple fact that his words reflect the regulatory reality of China’s internet, which holds platforms responsible for the content it distributes. And new rules that were just passed last month are considered even stricter. This is, by the way, the reason most Chinese people give when asked why most platforms’ content moderation is so intense; it would make sense that with the platform considered to be at fault for any mishap that it’s better to be more conservative than to accidentally step over the line. So at the minimum, maybe Allen was just re-affirming that WeChat very much intends to follow the rules.

But if I had to wear my anti-Allen hat, then maybe he’s also taking swipes at apps like Douyin (domestic Chinese Tik Tok) and Toutiao, Bytedance’s twin cash cows, who (used to) have the perception of being just huge time-wasters and negative for Chinese society (they’ve now been mostly mollified and converted). The short video apps especially have had various run-ins with the government on vulgar and unsafe content issues. WeChat wasn’t immune, of course, but its focus so far on publishing text-based articles meant that copyright protection has been its bigger headache, one that it believes it’s solved with greater user flagging, a method it’s also considering for stopping false or inappropriate content. In either case, stiff competition from Douyin and Kuaishou are clearly on his mind. As we’ve seen, the Tencent family apps have steadily lost share of mobile app usage by time in China. Half of it is going to Bytedance, and the rest of it going into an “Others” bucket that I’m sure includes Kuaishou, Bilibili, and more.

QuestMobile, Sept. 2019. L to R: Tencent Apps, Bytedance Apps, Alibaba Apps, Baidu Apps, Others.

BECAUSE, “CONTENT”.

Specifically with Bytedance / Douyin, many believed that the algorithm was more tailored towards promoting top of curve, head-level content with mass appeal, likely a side effect of its business model, which is primarily advertising. Its nemesis, Kuaishou, is built upon transactions (livestreaming e-commerce and tipping), and consequently, or so it claims, has an algorithm that promotes the long tail. What does this have to do with WeChat? Well, Allen has unambiguously always been about long tail, long before Bytedance’s virality driven algorithm exploded onto t he scene. He’s always talked about WeChat as a place where creators can cultivate their value. He reiterated that this is still WeChat’s aim, but that there has been a few mistakes along the way. One main one was how Official Accounts became a place for longform content. That wasn’t the initial intent. Allen’s original dream had been to have an opt-in system of short message notifications because China’s spam SMS was getting out of control (like today’s robocall epidemic in the US, except maybe worse, since some were geo-triggered). However, probably because there was a vacuum for independent publishing, it became instead just that – a self-publishing platform.

(A quick aside since this note was written, WeChat actually announced beta-testing of single-post paywalls, allowing creators to charge from $0.15 to $30 per article. WeChat will take out Apple’s cut when settling final payments, but will not take anything from Android payments for now. Subscriptions are not yet supported. This has been rumored for at least 3 years, but I’m guessing payment negotiations and copyright policing took a long time to get right. The latter remains a problem today, and rampant plagiarism could easily prevent this new feature from going very far, but the growth of the pay-for-knowledge market may offset some of that risk.)

Obviously though, longform text-based content is not for the casual creator. Naturally, the semi or fully professionalized content creators will dominate, since it’s very hard for anyone to have such intensive output. The solution then, is to go back to the original intent, of being an opt-in but low-barrier “short content” dissemination platform. Whether “short content” refers to wholly text or more photo / video based content is unclear, but I can’t imagine that there isn’t going to be some attempt at video. There is really no contesting that the “genre” is here to stay. I do think it’s important to note that WeChat 7.0, launched over a year ago, already played with this concept of more accessible content creation by debuting its own version of ephemeral Stories, but it does not seem to have taken off. But it might have been the wrong format: it was for distribution amongst one’s friends circle, which has been problematic for years now. Leave it to enterprising Chinese solopreneurs to turn every platform into a selling or promotional opportunity, especially distressing when authenticity is already so scarce. Official Accounts is a far better place for people to direct their creative energies; it’s also a place to sell (and more on selling later at the end of this letter on Work WeChat).

AND, COMMERCE.

Speaking of selling, another unsurprising announcement was a new livestreaming module into mini programs. Now, livestreaming on WeChat has been around, but you either had to make your own, or use another livestreaming app, such as Tencent’s own. This one sounds like something ready-made that developers can just insert into mini programs, which, now that there are over 1mm of them, seems a good service to provide. It is also, of course, a direct answer to what Alibaba and the short video platforms have discovered – that livestreaming works well, especially for e-commerce. Now that the 2019 GMV for WeChat mini programs is announced to be $115Bn (up 160% Y-o-Y and on par with Pinduoduo, the only one of the e-commerce giants still disclosing GMV), it’s clear that the original vision Allen had for mini programs – for discovering and accelerating offline transactions – was the right one. (I was initially a skeptic, as were many others, but the user experience, especially today, is pretty fantastic. Try it!)

If you’re wondering whether or not those same merchants will also benefit from these new functionalities, I would imagine so, especially with Retail accounting for the biggest percentage of mini programs by industry. The real question though is, how quickly will this take off and will it move the needle significantly? What it has going for it: mini programs now have a collective 300mm DAU (impressive, but Douyin did just reach 400mm). On the flip side, mini apps are (were?) designed to be quick in-and-out experiences, not for extensive browsing / shopping, although you can do that, certainly, and I have. My bet would be that these upgrades will likely be awkward at first because of the aforementioned entrenched user behaviors, but eventually the team will get to an iteration that works. This is because WeChat has accumulated so much trust with the general Chinese public that even though there’s plenty of complaints, it’s not often been against the integrity of the company, complex privacy issues aside. (You could not say the same about Pinduoduo at present, for example.)

AND SEARCH, TOO … IN BRIEF, ANYWAY …

I’ll only mention search briefly here because Allen mentioned it as one of the key things the team is working on. Currently, WeChat search goes through your contacts / groups, message history and message history as a default, but you can also click through to see the search applied to your Moments (friends’ feed), articles, books, music, and more, including just general web search (provided by Sogou). Right now, for mini programs, search is pretty light, operating at the title / description level only. But more integrated search, so it would seem, is coming. Allen said: individual app data is generally siloed, our dream is that search can go inside each mini program, again as a way for users to discover the long tail. This is, of course, hugely useful for the user, and for the mini-players as well. It’s the larger players who’ll need convincing, I’m sure, as everyone loves to build their own walled garden, most notably WeChat itself. But since many of the well-known services are already Team Tencent, those are probably easy negotiations. Again, this is not new or surprising, and is a bigger topic than can be fit into our first letter, especially with Bytedance also making a big jump into the fray, so look for our thoughts on it at a later time.

OH, AND ONE LAST THING, THAT THING CALLED “WORK”

We rarely hear about Work WeChat here in the West, or the enterprise version of WeChat, launched in 2015, at the height of the Slack and workplace messaging mania (Slack was launched in late 2013). The main Work WeChat chatter from the Open Lesson was about some features that have already been launched as of December as part of version 3.0, such as the ability to add folks on (normal) WeChat into one’s Work WeChat account and talk to them, send group messages, and … (!) “spam” them once a day with announcements / ads in their Moments. Allen has said repeatedly about Work WeChat that he thinks the true value is when employees can connect with those outside of their workplace, so that each employee becomes a “service window” for their business.

It’s odd to hear this as a Westerner, but I guess isn’t that odd if you live in China, where normal WeChat is used for, well, just so many business transactions. I mean, just last month I found a wedding photography studio in Beijing on Dianping, added them on WeChat, completed the whole thousand-dollar-plus transaction on WeChat, and would have probably felt better if the WeChat account I was interacting with had some verification of her employee status, instead of me just having to blindly trust that it wasn’t a scam. So, this ability would help, although I have to say, the studio folks told me they have a ton of WeChat customers just like myself, so the lack of verification doesn’t seem to have stopped anyone from handing over their shiny RMB. But still, given how so many of Chinese employees, especially in any kind of retail, are either paid fully or heavily incentivized on commission, there is a need … but still really only for employees focused on customer acquisition and service, right?

This is a totally different take from Alibaba’s DingTalk, similarly originally regarded as a Slack clone, and which already has over 10mm enterprise customers, up from just 7mm in 2018. (For comparison, Work WeChat claims just a fraction of that at 2.5mm business customers.) There’s also enough here for a future episode, so I won’t bore you with all the details, but suffice it to say that DingTalk is highly focused on the internal operations of the company, the ones closest to what might be considered “back office” (inner office?) tasks (such as timecards), opposite of this “front line” employee benefitting functionality that Work WeChat has launched.

What’s undeniable though, is that you see the same prioritization of managing “people” and relationships over coordinating “process” in both DingTalk and Work WeChat. This seems to be the opposite of the ethos of Slack et al. (“using Slack … creates a hub into which critical business information flows, is acted upon and transformed”), and even the shared channels Slack is pushing are still very much for information flow and project management, not the type of relationship building and management that Work WeChat seems to hint at. While the current success (at least in user count) of Dingtalk and Work WeChat would seem to indicate that the Chinese business environment indeed seems to be more suited for managing “people” over “process,” I wouldn’t dismiss the latter too readily yet. Bytedance is trying its hand at introducing process management to China with Lark (Chinese: Feishu). With its much-touted flat corporate structure and decentralized, data-driven decisionmaking (which we cover a bit in Ep. 28), it might be the right organization to do it. I do hope for the sake of Chinese employees everywhere that be it Lark or something else, may technology help usher in a new generation of less hierarchical, more transparent Chinese companies. One can hope, right?

Whew, that ended up being a long first letter, let us know how you liked it. And do us and the Tech Buzz community a favor, if you have relevant insights or personal stories about any of the companies / features / people I wrote about above, comment below and let’s discuss!

PPPS And one final thing, for those of you intending to attend the annual Los Angeles Daily Journal meeting with the one and only Charlie Munger, I will be there! Do reach out and say hi if our paths happen to cross!

Tech Buzz China https://www.techbuzzchina.com