Tencent beat first quarter estimates with with sales and profit that broke records partly thanks to online ad revenue from its popular social media platform, WeChat. Revenue from this source jumped 47 percent to 6.9 billion RMB (about US$1 billion), with a WeChat monthly active user base of nearly 1 billion, according to Bloomberg.
Earlier this year, WeChat improved its Moments ads feature to give brands the option to incorporate video, photos, text, and links on HTML5-powered pages, all hosted within a sponsored post on users’ Moments feeds. Brands that participated in the trial run for this innovation experienced a major improvement in consumer engagement, with luxury cosmetics giant Lancôme seeing a more than 350 percent increase in the number of searches for the brand, according to a recent report by Fung Global Retail & Technology. Lancôme also saw a 114 percent rise in the browse rate for its web page thanks to the ads.
According to March 2016 data from the China Academy of Information and Communications, about 41.9 percent of WeChat users follow accounts because of business promotions. News acquisition was the only motivating factor for following a WeChat account cited more frequently by those surveyed, meaning the platform’s importance as a marketing tool is only growing. Now, WeChat is working on AI technology that will further streamline these interactions so that brands can better target the right consumers from a massive user base.
WeChat Index is one of the most recent applications of this in that it can show brands, marketers, and users which keywords people are searching for the most on WeChat. The feature, which was launched in March, allows users to look up trending terms on WeChat and compare data for two brands at once.
Still, mobile advertising only makes up 2 percent of WeChat’s revenue, and despite its strong user numbers, WeChat’s growth is slowing, especially in first-tier cities. Much of its expansion potential currently lies in overseas markets and China’s lower-tier cities, as only 43 percent of tier-3 residents were on the platform as of October 2015, according to Fung Global’s report.
Abroad, WeChat’s growth efforts are evidenced by the expansion of its third-party mobile payment platform, whose main domestic contender is Alipay.
In terms of the percentage of users who have used each payment platform as of February, Alipay and WeChat are neck and neck, at 39 and 33 percent respectively. The way that plays out means Alipay has about 400 million registered users, while WeChat is at about 300 million. Alipay also has outrun WeChat in terms of cross-border payments, with 18 currencies supported to WeChat’s nine. WeChat’s transaction volume has been growing, boosted by its e-commerce partnership with JD.com, according to the report.
WeChat’s cross-border payment potential and Tencent’s performance is further evidence for its uncontested role as a marketing tool for Chinese consumers, as the report calls WeChat “by far the most attention-grabbing app in China.”