After its stock price reached a record high in Hong Kong earlier this week, Chinese internet giant Tencent, now valued at more than $300 billion, made the list of the 10 most valuable companies in the world regarding a report at Forbes. The company is best known for its popular social messaging platform WeChat, mobile payment solutions and fast-growing mobile gaming segment. During Tencent’s 2016 annual results announcement, management reiterated “Connection” as its strategy for 2017—which means WeChat will remain at the core of Tencent’s business development strategy, and with good justification. Within just six years, the social messaging platform has grown to become one of the largest communication platforms in the world, rivaling other popular apps such as WhatsApp and Facebook Messenger. The core value of WeChat is in the conversation data generated by the enormous user base, which Tencent monetizes through advertisements and additional offerings such as mobile games and payments.
WeChat in Retail
Beyond messaging, WeChat is also a source of news and promotional information for its users. In addition, it also allows customers to check out items via mobile payment, both online and offline. Thanks to WeChat’s all-around functionality, it acts as a channel for mobile advertisements, as well as loyalty program management. Most global luxury brands now have a WeChat account, which they use for marketing, customer service and to drive traffic to their offline locations.
In addition, department stores are utilizing WeChat in both the online and offline channels. For example, Intime Retail, one of China’s largest department store chain and mall operators, which was recently privatized by Alibaba, allows user to pay for purchases through WeChat Pay—a process that takes less than a few minutes. Leveraging on the functions of WeChat, Intime shortens the wait for long checkout lines in-store and, in turn, improves the customer shopping experience and conversion rate. Customers can also place orders on their Intime Retail WeChat account and choose any nearby store for pickup.
Monetization Through AI
On May 2nd, Tencent announced that it would open an artificial intelligence (AI) research facility in Seattle, Washington in the US. Headed by Yu Dong, a former scientist at Microsoft Research Institute’s Speech and Dialog Group, the AI lab will focus on speech recognition and natural language processing. It is Tencent’s second AI lab after the Shenzhen facility which was newly established last year. Although Tencent is clearly stepping up its efforts to integrate AI into its business model, it has arrived at the race relatively late. Competitors Baidu, Amazon and Google have already been putting significant resources into AI research, including imaging recognition, voice recognition, and self-driving technologies.
For example, at this year’s CES—the global consumer electronics and consumer technology tradeshow that takes places every January in Las Vegas, Nevada—Baidu demonstrated Xiaoyu Zaijia (“Little fish”), a voice-controlled virtual assistant akin to Alexa and Google Assistant. What differentiates Tencent from its competitors, and is a unique and valuable asset that cannot easily be replicated, is the conversational data of its more than 880 million monthly users. By adopting AI virtual assistant technology, WeChat will be able to rival other voice-controlled assistants. However, by integrating it into its all-in-one app, WeChat, Tencent should be able to successfully scale the service in China.
When it comes to social messaging, WeChat dominates in China, with no apparent competitors in sight. With the addition of an AI interface, we see WeChat becoming an enabler of disruptive O2O commerce, as it continues to bridge the gap between social marketing and commerce across multiple channels. As a result, it will become increasingly important for retailers looking to connect with the consumer in China to leverage on the WeChat platform.
Sources and first seen at: Forbes