There’s been a steady proliferation of mobile users in places like Japan and Singapore, and the apps (most notably WeChat) tend to be a constant companion. Users stay within the app to communicate, make purchases, make phone calls, and hold video chats. Messenger could support most of the features available in WeChat, even the shopping and one-click purchases.
WeChat has almost 700 million users and a sound revenue model. If the goal is to replicate this success for a wider market, Facebook will need to add features that Western users want. Consumers in Asia-Pacific have different buying patterns, are more willing to trust in-app purchases, and have a different relationship with the brands they rely on consistently.
Some of the recent updates to Messenger seem to indicate that Facebook is interested in following WeChat’s lead.
Making the right moves
The first move has to do with built-in artificial intelligence. Facebook acquired Wit.ai last year as a way to ramp up its investment in A.I. and show that the company has a desire to understand and commercialize both chat messages and behaviors. The Messenger M shopping bot, which relies on human operators to complete orders, is another bold step. Most recently, Facebook added chatbots to Messenger. What’s most interesting about the inclusion of chatbots in Messenger is that it shows a progression in building a mobile commerce machine. With chatbots, publishers and brands can automate customer support, shopping, content discovery, and interactions.
It’s easy to do the math. Facebook, speaking strictly of the social network, has 1.7 billion users. If the Messenger client attracts a completely new user demographic, those who are drawn to chatbots and in-app commerce, that could add even more users. For example, if Messenger drew users who have the WeChat mindset of a more personal, direct messaging experience, that could be another 700 million users drawn from North American markets. And if Facebook uses native ads within Messenger, similar to the way WeChat does, there’s a potential to increase revenue dramatically. Yet, there are some challenges.
When I envision the typical U.S. consumer staying hyper-connected to a messaging app, things break down a little. Chat apps are one of the few apps that still offer at least the illusion of privacy. WhatsApp, which Facebook acquired in 2014 but maintains as a separate app, added end-to-end encryption in April of this year. Users want privacy, but for Messenger to become the Western version of WeChat, users would have to grant permission to the social network that would allow it to persistently connect with, monitor, and then monetize their chat messages.
Then there’s the interface challenge. Messenger is a fun, instant chat app for mobile (it’s heavy on emojis, and there’s even a chatbot cat that tells you the weather). For it to become a true shopping app, users would have to see Messenger as a serious commerce app. Facebook would have to earn the trust of a user base accustomed to using Facebook as a platform for sharing baby photos and looking at grad pictures, not as a shopping portal that holds credit card information.
Santa Fe isn’t Seoul
To make it all work, Facebook needs to figure out how to brand the app effectively. In Asia-Pacific, one key to WeChat’s success is that more people use smartphones than computers. That trend is happening in the West, as well, but branding has lagged behind. Among the younger generation in Asia, for example, about 40 percent of the 4.3 billion users have a branded app (from Jingdong Mall, for example, or a company like Xiaomi). Maybe Best Buy will add a branded app, but U.S. users could balk.
But here’s the real hurdle. For Messenger to really explode as a chat client with native ads and shopping in the U.S., it needs to figure out a revenue model that works in the market. It’s amazing to think that the WeChat average revenue per user (about $7) is about seven times that of WhatsApp. The WeChat valuation is about double what Facebook paid to acquire WhatsApp. Yet, WhatsApp doesn’t have the same “app within an app” extensibility Messenger has. Perhaps only Snapchat could really become a close approximation of WeChat in the U.S., especially among millennials, because it offers similar extensibility and could be monetized as easily.
My guess is that Messenger will morph slowly into something that does resemble WeChat, but with a particularly American spin. I could see it integrating services Americans crave (e.g., Domino’s pizza), but end up generating much less revenue. Or, maybe Facebook will sit back, bide its time, and wait for some other chat client to become the Westernized version of WeChat. Facebook could then just buy its way into that highly monetized, branded-app experience.
Either way, Facebook’s actions around A.I. and chat should send a message to the U.S. market: WeChat is onto something, and we’d better all start paying attention.
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