What Tencent does better than Apple - Matthew Brennan

Matthew Brennan

Zhang Xiaolong, the founder of Tencent's WeChat, delivered a speech on how the future of the company looks like. Tencent watcher Matthew Brennan looks at the way Tencent is doing things different than Apple, and why their mini-programs might be a winner, in Technode.

Technode:

According to Zhang, the strength of mini-programs lies in its decentralized ecosystem. “Our team from now on will invest more manpower and resources in this area, so we can treat all companies equally, including the ones we’ve invested in.” 

Matthew Brennan, co-founder of China Channel said that the concept of decentralization was “a bit counterintuitive” compared to Apple’s carefully-curated App Store. But mini-programs have proved a “great way to acquire users that wasn’t there before.” 

The feature banks on WeChat’s widespread adoption to draw in older or less tech-savvy folks who don’t usually download many apps, Brennan said. It’s spawned successes like a popular mini-program for public dancing—a popular pastime among middle-aged people, particularly women—that otherwise wouldn’t exist. Their small size also lowers the barrier to entry for developers, saving them time and money.

More in Technode.

Matthew Brennan published notes on the 4-hour speech by (Allen) Zhang here.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on what Chinese companies do differently? Do check out this list.  

WeChat starts to tell stories, at last - Matthew Brennan

Matthew Brennan

China's most popular short-messages platform WeChat has at last included Snapchat/Instagram style stories. Long overdue, says Tencent and WeChat specialist Matthew Brennan at his website. He tells how it works, and why - if very late - this is a smart move.

Matthew Brennan:

WeChat is coming pretty late to the stories game. For much of 2017-18, we’ve seen them totally focused on building up the mini-programs platform, which might explain some of the lateness. Also worth noting that adding stories into the complex WeChat experience in a meaningful and impactful way without disruption of the existing ecosystem balance is tricky and not without risk. 

But the real reason why we haven’t seen WeChat embrace moments to date is likely to be founder Alan Zhang’s insistence on positioning WeChat as a tool for productively and efficiency rather than one that tries to keep users coming back to waste time. 

Yet it’s likely that the pressure from Tencent head office to leverage WeChat to fight against Bytedance and their flagship short video platform Douyin (TikTok) is proving too much. With WeChat 7.0 we’ve finally seen WeChat make an indirect but bold move into short video. 

Overall I’m pretty positive on how they’ve adapted the stories format to WeChat with this new update. I expect this feature to have a significant impact on WeChat usage habits, increasing stickiness and time spent in the app and negatively impacting consumption of other forms of short video in the China market. There will probably be some degree of cannibalization to traffic on the moments newsfeed also. 

Stories have proven to be an immersive and engaging format across many different apps. The ephemeral nature of the format (24 hrs and they disappear) naturally drives users to return. The original innovation came from SnapChat who Tencent previously looked at acquiring and now own 17% of parent company Snap. 

The most important entry point for traffic into this new feature might be groups and 1on1 conversations, not the newsfeed (Interestingly Facebook also introduced stories into Facebook groups this month). Messaging is traditionally an inhospitable environment for monetization. From a platform owner’s perspective, it’s not simple to monetize chat conversations, you can’t put adverts in there without seriously disrupting the user experience. 

Tencent have done well with cracking this tough nut, firstly using lucky money in chat conversations as a way to kick-start WeChat Pay and secondly with sharing of mini-programs in groups as a way to foster e-commerce (e.g. Pinduoduo). Stories could be a third way to leverage the huge traffic of chat conversations as they can be monetized with ads and full-screen auto-play video ads at that; no wonder Facebook is trying to stuff stories everywhere they can. 

Tencent is conservative with ad inventory, so I expect it will be quite some time before we see ads in WeChat Stories (if ever), but certainly the potential is there for them to turn on the taps if need be. In the short to mid-term, the primary benefit will be increased stickiness and engagement mostly at the expense of competitors. 

Tencent must know that chat conversations are the real key to both WeChat traffic and monetization. They might be reluctant to place more pressure on the newsfeed where traffic has been falling or official accounts that have also seen declines in page views. Chat conversations have incredibly high value to users and unlike in newsfeeds, Tencent’s position is highly resilient to competition.

More at the ChinaChannel.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

How Tencent moves into the cloud - Matthew Brennan

Matthew Brennan

Tencent is moving its business model from mainly WeChat and B2C to the cloud. Tencent expert Matthew Brennan looks at the China Channel to the results he sees at the 2018 3Q results. It was the first time Tencent disclosed figures on their cloud activities.

Matthew Brennan:

Tencent claimed to offer more than 200+ cloud products and 70 industry solutions and also claimed leadership in cloud services for gaming and live broadcast. They noted making progress in the finance and retail sectors something that makes sense given the recent announcements of partnerships to provide digitalization services with brands such as Shangri-la hotels and Walmart. 

We also heard higher management elaborate further on their ‘industrial internet’ strategy. President Martin Lau had this to say during the Q&A session: 

“The initial opportunity (for industrial internet) is based around the cloud business. The nature of the cloud business is that it does require quite a bit of capital expenditure. We need to build the IDC (Internet Data Centers) and buy the servers. This business is low margin because it’s only staying at the infrastructure level. We look at it as a long-term investment for the future.” 

Opportunities will arise when we move from Iaas (infrastructure as a service) to Paas (platform as a service) and Saas (software as a service), then we can actually start generating high margin revenue. We can also have new value-added services built out from our connection with the industries. If we could establish a CRM or OEMs to reach customers then there will be associated marketing revenue and VAS. 

In the beginning, nobody really generated any revenue from the consumer internet. We start from providing product that we know will generate value for the user. Over time we start to develop different kinds of business model from that valuable service. For the industrial internet it’s the same philosophy. We see that we can actually add value to a particular industry to the partners that we sign up and we know that by bringing technology and ways for them to connect with users we can create value for the users and the industry partners.” 

This last part makes a lot of sense. Tencent higher management have made it clear they are very willing to move into new areas where the business models aren’t initially clear. 

“Monetization can come in unexpected ways, we don’t know what innovations will happen in the future.” one Tencent exec described during a lecture I attended earlier this year. 

Perhaps that’s the luxury of working in the internet sector where marginal costs are almost zero, any kind of monetization across hundreds of millions of users can work out to be highly profitable. 

It also seems that Tencent is looking at this shift as something that will play out over a very long time horizon, perhaps a decade or more. I found it interesting that despite the narrative in media that Tencent is cost cutting, staff headcount increased by 8% in the last quarter, the fastest rate in 2 years. CFO John Lo attributed mainly to hiring for the areas of Payment and Cloud. So beyond the recent restructuring, Tencent is also rapidly increasing human resource capacity in “industrial internet” related areas.

More at the China Channel.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more innovation experts at the China Speakers Bureau? Do check out this list.  

How Tencent moves to B2B - Matthew Brennan

Matthew Brennan

Tencent watcher Matthew Brennan has an in-depth look at how the recent reorganization of the internet giant reflects on the internet in China, especially how the company that became big through WeChat and B2C moves towards a more industrial approach, he writes on his weblog at China Channel.

Matthew Brennan:

“From the management side, the biggest challenge we face is internal organization. Right now Tencent needs to get better at doing B2B.” – PonyMa, Tencent Annual Internal Staff Meeting 2017 Dec 15^th. 

This quote is from the annual Tencent internal staff meeting last year, it shows the higher management have been aware for a considerable time that change in organizational structure and strategic focus were necessary. Pony Ma when he has given public talks over the past year, they have mostly been focusing on the areas of B2B business most often mentioned would be Tencent’s smart retail solutions. 

It seems that higher management has decided that the development of Tencent’s B2B solutions will decide the future potential of the company. B2C business has peaked as the number of mobile internet users has passed its rapid growth stage. User growth for most major internet companies has declined considerably. 

Yet when doing B2B internet business in China, Tencent will undoubtably find themselves competing with their arch rival Alibaba and this competition will be tough. Alibaba unlike Tencent has B2B in their blood. From the early days their company started out with the incredibly tough job of making sales of their internet services to factory owners who’d never heard of the web before. Persuading them of the merits for this new way of gaining clients without meeting them in person. 

“Many people said we only have ‘B2C’ in our DNA. B2B is not in our blood. I don’t believe that. I think that every evolutionary successful species holds characteristics that weren’t there at the beginning but were evolved over time.”- Martin Lau, Tencent Internal Staff Meeting 2017. 

Tencent’s traditional strength throughout it’s 20 years of existence has always been in B2C. They have a proven understanding of how to monetize large user bases. They have access to the deep social graph of Chinese internet users and they are consistently able to produce products that Chinese consumers love to use. 

Apart from investment income, Tencent’s main profit model today is to accumulate new users, cultivate their usage habits over time, and make profits eventually through games, user fees, and advertising. This monetization could be said to be a long and indirect process. By contrast, the revenue earned from B2B businesses appears to be more direct and the clients are often stickier. Once the relationship is established, transactions will continue, and the income is more stable than B2C.

Much more at the China Channel.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on China's internet? Do check out this list.  

Investors have a too-short view on Tencent - Matthew Brennan

Matthew Brennan

Tencent's shares moved like a roller coaster, but that reflects more the short-term sentiments of investors than changes in the company's prospects, says Tencent watcher Matthew Brennan to Global Times.

Global Times:

Tencent's shares were among the world's best performers in 2017, when a 13-month winning streak led the stock to more than double from HK$179.7 in December 2016 to HK$471.2 in January 2018. 

This year, however, the shares have tumbled about 35 percent, falling to $HK308.4 on Wednesday. Tencent shares are down 15.6 percent in the past two weeks alone in response to tightening regulation of China's videogame market. 

"Investors are being too short-termist," Matthew Brennan, founder of Tencent-focused tech consultancy China Channel, told the Global Times on Wednesday. 

"Tencent's stock rose incredibly in 2017, then dropped rapidly in 2018, but its long-term strategy hasn't changed that much. Tencent is focusing in mini-programs, and all major internet companies in China are following that lead," said Brennan.

More in Global Times.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

Fighting WeChat: a tough challenge - Matthew Brennan

Matthew Brennan

Bullet Messenger profiled itself last week at a competitor of WeChat, and got a lot of interest, certainly from investors. But its mission might be very tough to achieve, says WeChat expert Matthew Brennan at PYMNTS. "This is not a WeChat killer."

PYMNTS:

The tailwinds are multiple. For one thing, said the newswire, Bullet Messenger has a “stripped-down” appeal to the masses (more on this later), and in a competitive landscape dominated by the likes of WeChat, those same masses of users are looking for an alternative. 

At the same time, money and consumers chase and lock in on what’s available. According to Matthew Brennan, co-founder of consulting firm China Channel, the disruption is one that comes with speed, and, as he said, “there is an increasingly large amount of easy money chasing increasingly fewer opportunities, while there is also a very large pool of talented entrepreneurs now, so people know how to scale businesses fast – there is an established playbook.”... 

Still, at the moment, though the initial embrace of Bullet may impress, at least some observers state that the competitive landscape is unlikely to tilt anytime soon. WeChat, as Tencent noted in its most recent earnings results, is a bright spot for the company, as monthly active users grew by 10 percent year over year to reach and breach that one billion user milestone. 

Said China Channel’s Brennan, “this is not a WeChat killer. Bullet is still tiny and has a lot to prove,” adding that it is “very, very difficult” to build successful social networks where users actually stay.

More at PYMNTS.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.

How QQ gets a second life - Matthew Brennan

Matthew Brennan

Tencent's QQ has been the granddaddy of the Chinese internet and seemed on the way out, but is making a comeback, says Tencent expert Matthew Brennan at the South China Morning Post. With a slew of new features, QQ has become attractive for the younger internet users.

The South China Morning Post:

Daily active users of QQ Kandian, the algorithm-driven entertainment news feed within QQ, surpassed 80 million in the first quarter of 2018, according to a first-time release of data from Tencent. And 70 per cent of those users belong to the generation born after 1990. Kandian targets the entertainment-oriented information needs of young users by aggregating rich content related to anime, comics and games, pop stars, extreme sports, fashion, beauty and technology. 

“The success of Kandian does not necessarily get QQ users going up, but the time spent on QQ has increased,” said Matthew Brennan, who tracks Tencent at China Channel, a Shenzhen-based marketing agency. 

Integrating engaging entertainment content into its social platforms is a key focus for Tencent... 

Aside individual products, QQ has also introduced a series of features such as facial beautifying tools, painting-styled photos, animated video stickers, face swap effects and video chat filters designed to make interaction and communication on its social platform more fun and entertaining. For example, QQ users can create video GIFs of themselves, decorate the GIFs with animated stickers and share them with friends. 

“If you use QQ mobile messenger, it feels very colourful and lively … and I think that’s the right strategy,” said China Channel’s Brennan. “Live-streaming, e-sports and short-videos … whatever is popular among young people you can find in QQ.” 

But it’s not just the colourful features that appeal to young people – it’s that sense of using something their elders don’t. What’s childish for mature internet users can be cool for teenagers.

More at the South China Morning Post.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

Tencent's investment strategy disclosed - Matthew Brennan

Matthew Brennan

Tencent's investment strategy is mostly a black box, where observers try to find a red line by looking at what the internet giant is doing. Tencent analyst Matthew Brennan got the unique possibility to discuss those issues with Tencent Investment Partnership Manager, Li Zhaohui, and published a translation on China Channel.

China Channel:

Q：There is a view that Tencent’s focus on investment is now hindering its own business innovation. What do you think of this? 

A： It’s totally wrong to place the investment performance and one’s own business as opposing goals. i.e. if the investments are doing well, it will lead to a bad core business, or saying business is turning bad because Tencent has placed more energy into investing. This is a misunderstanding. On one hand Tencent’s investment contributions to the main business can be very direct, such as our investments into the gaming industry. In this way, we have established long-term strategic relationships with our core partners to ensure that we have access to the best games in the world. On the other hand, other investments can have very strong synergies and mutual promotional relationships with Tencent’s core businesses. These relationships are far from being as simple as how much money is reported on our financial statements. 

Q：What synergies are there with the main business? 

A： Investments provide Tencent with many opportunities and possibilities for expansion into new areas. The classic example is e-commerce. If there was no investment, it would be difficult for Tencent to enter this field. Before Tencent had （拍拍网）PaiPaiWang, which it was running for many years. After entering the e-commerce business, it was through investments that we gained controlled of 51buy.com, which was the biggest competitor of JD at the time. After that, we invested in some vertical e-commerce players and new format e-commerce, such as Pinduoduo. Some investments also combine offline operations, for example we are not likely to run our own offline bike rental business. In this way it’s only through the strong binding of interests through investment, that Tencent will use its huge traffic and user base to help these business. In this process, Tencent’s investment department plays a very important role.    

Q：But the establishment of partnerships is possible not only through investment. For example, Starbucks and Ali have recently reached a cooperation, but they do not have an equity partnership. 

A： The Tencent business unit has done many things on its own. We are the biggest proponents of the “Internet+” policy and have business partnerships with various entities including local governments. Another example is that every year we distribute thousands of games, and it is impossible to have an investment relationship with every company. 

Q：Why are you entering so many industries? This type of investment has been referred to as “sprinkling pepper”. 

A： The investment reflects to some extent Tencent’s attitude of restraint towards other industries. Our thinking is relatively clear, only invest in areas related to Tencent’s business, mainly consumer Internet (tips: Consumer Internet refers to the application of internet across an individual’s daily life. Specifically, the comprehensive digitalization of personalized needs regarding clothes, food, housing, travel, medical and other daily life situations). If you say that we are constantly entering new areas, there are only two reasons. First, the Internet is also expanding and entering many new areas. We are simply following the trends of how the Internet is expanding. Secondly, too many industries and fields are converging. It’s getting difficult to easily categorize what field companies are in. 

Q：Are there any areas you absolutely will not invest in? 

A： Many. For example, in the past few years, many companies that have nothing to do with our core business have asked us to consider investments, some of which are very certain to be profitable, but we won’t do it. New materials and communication equipment in the TMT sector, we are very clear not to invest there because we do not understand this area. Alternatively, if we see a loss-making company with a lack of experienced management, but we believe the company holds value and can meet the needs of a large number of users, even if it faces many difficulties, we are willing to invest. 

Q：Some investors suggest that you should learn from Alibaba, to do more mergers and acquisitions, integration, do you think that makes sense? 

A： It’s not a case of black and white. Regarding mergers and acquisitions, we are quite strong willed. M&A itself is a very difficult thing. Alibaba has done very well, I think they’ve done amazing and it’s worth learning from. If you look at Alibaba’s mergers and acquisitions, they are all in the fields that they are relatively familiar with. We also do similar things in the areas of gaming and literature for example.

The full interview you can read at the China Channel.

Tencent's Li Zhaohui

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on e-commerce at the China Speakers Bureau? Do check out this list.  

The threat for Tencent: competitors like Bytedance - Matthew Brennan

Matthew Brennan

China's internet giant Tencent had a rocky week with less than stellar quarterly figures and a government ban of a successful game. But while Tencent keeps on doing well, English language media have missed a major threat for Tencent, says internet expert Matthew Brennan on his China Channel website. Competitors like Bytedance and Tik Tok undermine the giant, he says.

Matthew Brennan:

The rivalry between Tencent and Bytedance has been dissected endlessly by Chinese media, surprisingly (to me at least) much less has made it over to English. The rise of Bytedance’s micro-video application Douyin, known internationally as Tik Tok, is surely one of, if not THE major success story of China’s internet industry in the first half of 2018. 

Bytedance has proved themselves to be very capable. They are far from a one trick pony and now have a family of apps (a-la Facebook) with two major knock-the-ball-out-of-the-park successes, the original newsfeed aggregation app “Daily Headline” known as Jinritoutiao in China and now the even bigger success of Douyin. 

Why is this both an important long-term problem for Tencent? 

Tencent’s losing it’s grip on attention a little. Entertainment is a zero-sum battle. A user can’t spend time on Tencent’s properties if they are busy scrolling through micro-videos on Bytedance’s platforms. The situation is by no means critical but it’s concerning. It certainly should be concerning to investors and much more so I believe than a temporary blip in gaming revenue. 

This shift in attention is not showing up that strongly in Tencent’s financials currently; the online advertisement segment did okay this quarter. Tencent is still a very conservative organization (famously so in fact) when it comes to ads monetization and there’s plenty of runway still. Yet even if Tencent did lose many eyeballs which they weren’t really doing a great job of monetizing anyway, why as an investor should I care? 

Because Bytedance has built an alternative Chinese ecosystem of news and entertainment apps which, while smaller, now rivals Tencent’s ecosystem for where Chinese users will go to kill time on their phones, where advertisers look to spend ad yuan online and where media or influencers look to distribute content. They’ve done the hard work and built up a lot more than just a foothold (see chart above). Whatever direction they choose to take things from here the next steps will be easier than the previous ones, they have momentum. 

Tencent has a nimble and dangerous independent competitor of scale in the local market eating up time from their pan-entertainment empire. That’s what investors should be concerned about. The $75 billion* USD problem.

More at the China Channel. Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

WeChat: huge and still growing - Matthew Brennan

Matthew Brennan

Tencent's WeChat has become the largest national platform in China. But despite its one billion monthly active users, the platform is only starting to grow and monetize its base, for example by using its mini-WeChats, says WeChat expert Matthew Brennan to the South China Morning Post.

The South China Morning Post:

“[WeChat’s user numbers] haven’t hit the ceiling yet but I think they will at some point,” said Matthew Brennan, managing director of independent WeChat consultancy China Channel. “But they still have a lot of room to grow in advertising, and now with mini programs.” 

Mini programs refer to applications typically smaller than 10 megabytes that can run instantly on the main app’s interface. They offer speed of access to users because a program does not have to be downloaded from an app store, they can run from within the app. This innovation allows platforms to host multiple services, turning them into super-apps, delivering greater convenience to consumers in the world’s largest smartphone market... 

WhatsApp, WeChat’s biggest overseas rival today, was available to the Chinese market at that time [it was later banned by China in 2017 ahead of a major Communist Party congress] but missed its opportunity without any localisation or promotion in the market, China Channel’s Brennan recalls.

By the second quarter of 2018, the number of WeChat mini programs reached one million and mini program users surpassed 600 million in June this year. 

“The mini program initiative is opening many doors for Tencent,” said China Channel’s Brennan. “Monetisation due to adverts and payments … and by allowing [Tencent] to incubate and accelerate a variety of businesses within the ecosystem – e-commerce in particular.”

More in the South China Morning Post.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on the China take of its digital transformation? Do check out this list.  

WeChat: an unavoidable magnitude - Matthew Brennan

Matthew Brennan

Tencent's social platform WeChat is so huge, nobody can avoid the giant in China, says WeChat expert Matthew Brennan to Sixth Tone. Even Alibaba's Jack Ma, Tencent's largest competitor, has to use the platform.

Sixth Tone:

Matthew Brennan — co-founder of consultancy China Channel, which provides insight into WeChat for foreign firms — agrees that WeChat is “pretty much unavoidable” for anyone who wants to function normally in Chinese society. He cites the case of Alibaba founder Jack Ma, who famously announced in 2013 that he would be quitting WeChat and launching the company’s own messaging app. The app turned out to be a total failure, and Ma ended up reluctantly admitting in a livestreamed interview last year that he was back to using his competitor. “Even if you hate it as much as Jack Ma does, you have to use WeChat,” Brennan tells Sixth Tone.

More in Sixth Tone.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for another e-commerce expert at the China Speakers Bureau? Do check out this list.  

Local messaging apps beat international competition - Matthew Brennan

Matthew Brennan

In China, Tencent's WeChat became the leading messaging app, but  - unlike many think in the West - it is not government censorship that kept international competition at bay, says WeChat expert Matthew Brennan in The National. Also in other countries, local messaging app prove to be stronger.

The National:

In its native China, Tencent is a household name responsible for an app that has become a part of daily life – it’s called WeChat (“Weixin” in Mandarin). 

“It’s the universal connector in China,” says Matthew Brennan, who is writing a book on the history of WeChat, and regularly gives presentations about the app. “It’s the pipework for information. Everyone uses it, and people open WeChat around 40 to 50 times a day.” WeChat has more than a billion users and has features such as messaging, video conferencing, a social news feed, e-commerce, payment functions, smart city apps and transport booking, and much more. 

Mr Brennan believes it’s a common misconception – reported recently in the likes of The Guardian newspaper in the UK for example – that WeChat came to dominate in China because of state censorship of Western social media like Facebook and Instagram. 

“If you look at Line in Japan, or Kakao in South Korea, or Zalo in Vietnam, it’s been strong local competitors in Asia that have won,” Mr Brennan says, referencing the dominant messaging apps used in different Asian countries. 

“It’s winner takes all, and WeChat won [in China],” he says. 

Tencent is the world’s fifth-largest tech company by market capitalisation, overtaking Facebook this year and sitting behind only Apple, Alphabet, Microsoft and Amazon. It has flourished, mostly domestically, through the likes of WeChat, its app store and content provision with Tencent Video and Music, but in another important domain it has become a powerful player on a global scale.

More in the National.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

WeChat: the new normal for 900 million users - Matthew Brennan

Matthew Brennan

WeChat, Tencent's mobile platform, is now reaching 900 million users in China, and in four year time it has become an indispensable tool for anybody living in the country, says WeChat expert Matthew Brennan at InTheBlack. "WeChat is not a social media. Think of it as an operating system for your life in China’,” says Brennan.

In the Black:

WeChat’s reach has expanded into all walks of life. The effect has been that while you certainly can do business and socialise in China without WeChat, using the platform gives you direct and instant access to everyone. 

“It would now be very difficult to live in China and be a normal functioning member of society without having a WeChat account,” says analyst and WeChat specialist Matthew Brennan. 

“The a-ha moment for me was about four years ago when I used WeChat Pay in a convenience store for the very first time. I realised then that it was really cool, it was really convenient, and it was going to change the whole of China – and it has. I realised it was not just messaging, it had a much, much greater ambition, and that’s the way it has played out.” 

Brennan’s Beijing-based China Channel company charts trends and developments on the platform, while also offering training sessions for businesses that want to learn what WeChat is all about. There is one thing he always tells people during a training session. 

“The first thing I say is ‘don’t think of WeChat as social media. Think of it as an operating system for your life in China’,” says Brennan. 

“In China, we went from nothing to mobile payment. There have been credit cards but they have never been used in the same manner as they have in Europe or America. That habit of reaching for plastic whenever you have to pay for something, like the Americans do, was never ingrained in the Chinese.” 

These days, the Chinese daily press comes full of tales of small isolated villages where people are quickly dispensing with their traditional means of doing business – and WeChat is the leading alternative.

More at In The Black.


Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more experts on the digital transformation in China at the China Speakers Bureau? Do check out this list.  

How WeChat Pay took off with digital red envelopes - Matthew Brennan

Matthew Brennan

When Tencent started during the 2014 CCTV New Year show to promote giving red envelopes online, few realized it was the successful kick-off what is now known as WeChat Pay, says WeChat expert Matthew Brennan to the JingDaily. Some luxury brands did not like the concept though: "The idea of a discount communicates value and is generally not an incentive that luxury brands want to be associated with."

The JingDaily:

“It was a very important moment when red envelopes became popular because it is not an exaggeration to say that WeChat Pay itself was built upon the success of ‘lucky money’ or ‘red envelopes’ on WeChat,” said Matthew Brennan, a known WeChat expert and co-founder of China Channel. “Without lucky money, WeChat Pay wouldn’t have the adoption that it has today.”... 

There have been a number of other ways brands have adopted the concept of the red envelope in their daily marketing schemes through cooperation with WeChat Pay. After buying something in-store using WeChat Pay, consumers may, for instance, receive a red envelope with a surprise discount. Sometimes, payees are also prompted by the brand to send ‘lucky money’ to a friend, helping the brand expand its customer base. In most cases, Brennan says, the participating companies are consumer brands because the idea of a discount communicates value and is generally not an incentive that luxury brands want to be associated with. 

However, as WeChat and Alipay race to find ways to retain users for their mobile payment ecosystem, they continue to explore ways to incentivize shoppers and even promote various new technologies. Last year, on the tail of the global Pokemon Go phenomenon, Alipay included red envelopes in an augmented reality (AR) game where users could give the app access to their cameras and locations in order to see digital hongbao floating in front of them. Brands have gotten involved by teaming up with Alipay and “hiding” AR red envelopes in their stores or among their products, promoting online to offline (O2O) engagement among followers. WeChat has also empowered retailers to tap into O2O gamification using red envelopes, working with a mall to incentivize shoppers with a hongbao scavenger hunt. 

Luxury brands such as Hermès are already using mobile games as a marketing channel. In place of offering discounts, they can instead reward engagement with exclusive products or access to events. 

Alipay and WeChat Pay present significant new opportunities for brands operating in China. 

“There’s an intense war to protect those payment platforms and also to integrate increasingly more with offline payments, merging online and offline retail experiences,” Brennan said. ”From the backend, this also means utilizing data better and improving logistics as the expectations of the consumers in China are increasing.”

More in the JingDaily.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

Are you looking for more fintech experts at the China Speakers Bureau? Do check out this list  

VPN cat-and-mouse game will continue - Matthew Brennan

Matthew Brennan

China's internet authorities have strengthened the rules on VPN's - popular tools to jump the country's online censorship. Nevertheless, getting online with a VPN is still relatively easy, says internet expert Matthew Brennan to The News Lens, but he is not giving a guarantee that will still be the case in one year time.

The News Lens:

There have been many fears that China would tighten its VPN enforcement in the past – with rumors circulating of bans on Jan. 11 and Feb. 1 – but this one is backed up by official statements. The MIIT announcement came less than two weeks after the state-run Global Times denied that a ban was in the works, quoting a “China Telecom staff member.” 

WeChat expert and frequent technology commentator Matthew Brennan told The News Lens that these moves should come as no surprise: “The Chinese government's stance with regard to enforcing sovereignty over its citizens’ use of the internet has been consistent. This will become a game of cat and mouse between an increasingly sophisticated firewall and VPN service providers.” 

A ban would be excellent news for the approved VPN providers, who happen to be the three state-run telecom companies, China Telecom, China Unicom and China Mobile, who advertise direct links to the outside world, a service geared towards corporate clients... 

While privacy from prying Communist Party eyes has already been compromised, censorship will not be absolute. The restricted use of VPNs and which sites are blocked varies widely depending on location, the level of political tension, and a host of other reasons, and there is no reason to believe that this will change. 

As Brennan said, “Right now, it's still relatively easy for anyone who is determined to do so to jump over the firewall. Whether that's still the case in a year's time, we'll have to wait and see.”

More in the News Lens.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more internet experts at the China Speakers Bureau? Do check out this list.  

Both Alipay and WeChat Pay can survive in China - Matthew Brennan

Matthew Brennan

Much attention goes to the epic battle between China's internet giants Alibaba and Tencent. But WeChat expert Matthew Brennan does not see why one of their payment systems, Alipay and WeChat Pay, should defeat the other. He sees room enough for both, he tells That's Magazine.

That's Magazine:

At present, China’s two major players in the mobile payment space, Alipay and WeChat Pay, hold about 54 and 40 percent of the market share respectively, according to a 2017 iResearch report. China Channel cofounder Matthew Brennan attributes their dominance to the strengths of their parent companies, ecommerce giant Alibaba, and Tencent, the world’s most valuable social network conglomerate... 

Brennan adds, “Both platforms, however, have successfully adapted themselves into the virtual world and into the offline economy… at the end of the day, I don’t think it’s about one winning or losing, as both are well-equipped to thrive in the market.” 

The US might be the world’s largest economy, but when it comes to mobile payment, the Chinese are way ahead. China’s total mobile payment transaction revenue was 50 times more than their American counterparts in 2016. Meanwhile, 52 percent of Chinese say less than 20 percent of their monthly transactions are conducted with bills and coins, according to the ‘2017 Mobile Payment Usage in China’ study published by China Tech Insights. 

Credit card companies and many Westerners’ ingrained habit of using cards as their primary payment option have prevented mobile payments from taking off, according to Brennan...  In a country where Visa, Mastercard and American Express still have yet to fully penetrate through the masses, Chinese consumers were able to easily move on from cash and plug themselves directly into the ecosystem that Alipay and WeChat Pay have created.

More at That's Magazine.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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Can Facebook overtake WeChat? - Matthew Brennan

Tencent's WeChat has been a winner in China in terms of users but might even beat its Western competitors in terms of functionality, writes WeChat analyst Matthew Brennan at the China Channel. The bigger question is will the tech giants outside China ever be able to catch up?

Matthew Brennan:

Chinese users spend approximately one-third of all their time on mobile in WeChat. That presented a huge opportunity to build extra features and functionality on top of the basic messaging experience. And it was many of these features that hit the China market at exactly the right time, met the needs of local users perfectly, and helped propel WeChat to becoming the juggernaut that it is today. 

Classic examples include Shake-shake, Friends Nearby, Walkie-Talkie, QR Codes, Official Accounts, Mini-Programs, and of course WeChat Pay. 

It’s no coincidence that Tencent was the company to grasp this best, given their previous experience with flagship desktop messaging product QQ. Tencent CXO David Wallerstein had this to say: “When it came time to building value-added services around WeChat, it just came to us very naturally because we had just learned so much over a decade, probably like 12 years of learning by the time we got to WeChat… we also started thinking more about the economy, more about financial services, more about e-commerce, about how do you really transform a business or a hospital or a government using WeChat and I think we had so much experience with platform services and tying services together in a seamless way that when it came time to WeChat, it was like okay, good fresh platform, let’s get everything right this time.” 

The growth rate of new active WeChat users has been steadily declining for many quarters and many — myself included — believe it has pretty much reached a ceiling. The future and focus of WeChat will not be about gaining more new users, it will be about embracing it’s stated vision to “Connect people to people, people to services, people to businesses, and people to objects.” 

The digitalization of daily life continues at rapid pace in China through trends such as mobile payments, online-to-offline services, the sharing economy, smart retail and digital ID cards. WeChat acting as China’s great universal connector is at the very center of all of this and showing little sign of relinquishing its place at the forefront of Chinese innovation. The bigger question is will the tech giants outside China ever be able to catch up?

More at the China Channel.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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WeChat goes for more services, as growth stalls - Matthew Brennan

Matthew Brennan

Tencent's WeChat announced a record number of monthly users over Springfestival passing one million. But WeChat expert Matthew Brennan expects that growth in numbers reached its top, and WeChat will be adding more functionality to expand its business, he tells CNNMoney.

CNNMoney:

WeChat’s number of monthly active users popped above the milestone during the Lunar New Year holiday in February, its parent company, Tencent, said this week. It’s an impressive number, but it’s still well short of Facebook’s 2.1 billion monthly users or WhatsApp, which has more than 1.5 billion. Catching up with those totals will be tough. WeChat is the dominant messaging platform in China but has struggled to win over large numbers of users outside its home market. 

“The growth on WeChat has been slowing down consistently for the last two years,” said Matthew Brennan, founder of ChinaChannel, a WeChat-focused research firm. 

“It’s really topped out, I feel,” he said. “It’s not going to go much further.”... 

But user growth hasn’t been a priority for WeChat for some time, according to Brennan. Instead, Tencent is focused on pushing users to turn to the app for more and more activities, such as gaming, entertainment and payments. 

By getting people to spend more time and money on those services, WeChat has a lot of “untapped potential” for bringing in greater revenue, according to Brennan. “It’s not about new users anymore,” he said.

More in CNNMoney.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form.

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How Alibaba and Tencent retail strategies differ - Matthew Brennan

Matthew Brennan

China is leading the way in digitalizing the consumer experience in retail, but both major competitors - Alibaba and Tencent - have different retail strategies, says WeChat expert Matthew Brennan to the News Lens. Alibaba focuses on the offline experience, Tencent's WeChat will stay online. In 2018 the battle will be on mobile payment, he adds.

The News Lens:

Matthew Brennan, founder of China Channel, a consultancy on China's digital market, said that the trend is apparent across all consumer-facing industries. "China is leading the rest of the world in terms of digitalizing the customer experience and blending this experience seamlessly between offline and online elements," Brennan said. According to Brennan, retailers are moving back to offline as online growth matures – being a purely online play will no longer sustain the rapid growth that Alibaba and Tencent are used to. 

Tencent’s payment service, WeChat Pay, already has about 800 million users in China, and together with Alibaba's Alipay, the pair dominate China’s massive mobile payment space. The majority of retailers here, from supermarkets to street vendors, now accept either or both forms of payment. As such, the latest official data showed mobile payments reached 81 trillion yuan in the first 10 months of last year, up 40 percent on the whole of 2016. While Tencent has its fingers in many pies, it is not a direct retailer, and instead relies on a partnership with e-commerce major JD.com in place since 2014 to drive sales through WeChat Pay. 

The two companies announced in October that they would expand the cooperation via the launch of the JD-Tencent Retail Marketing Solution, which according to a press release promises to “integrate insights on consumer behavior from Tencent’s social platforms with online and offline shopping data from JD and its brand partners.” Pushing into unmanned stores is thus a natural next step for Tencent as it attempts to remain relevant in "new retail" while building on its existing strength in the mobile payments market. 

"WeChat does not have ambitions to open its own stores across China, Tencent's strategy is to partner with existing retail players and help digitalize the retail experience," Brennan explained. "Both [Alibaba] and Tencent are now moving into a wide variety of vertical industries for a variety of reasons, retail though is the most important battleground for 2018. “In the short term, new retail is in large part about mobile payments. Tencent and Alibaba are blocking each other's moves to protect their market share in payments."

More in the News Lens.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers' request form. 

Are you looking for more innovation experts at the China Speakers Bureau? Do check out this list. 

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Tencent: retaining employees - Matthew Brennan

Matthew Brennan

Handing out hongbao's when staff returns from Spring festival is one way how Chinese companies retain staff. WeChat expert Matthew Brennan joined Tencent's CEO Tony Ma handing out hongbao's last Friday in Shenzhen to some of this 43,000 employees, he reports on his LinkedIn page.

Matthew Brennan:

[Friday] saw one of #Tencent's most famous company traditions. Every year since the company was founded in 1999 the CEO Pony Ma and other managers have welcomed back staff to work after the Chinese New Year holiday by handing out red envelopes filled with cash to every member of staff. Tencent now has over 43,000 staff some of which queued from 3 AM in the morning at the #Shenzhen HQ to be the first in line to pick up multiple red envelopes both physical and digital from management. With such a company tradition is it any wonder that the #WeChat team was inspired to digitalize the red envelopes tradition which ended up being the key to making #WeChatPay such a huge success.

CEO Tony Ma hands out hongbao's

More information (and very different opinions) at Matthew Brennan's LinkedIn page.

Matthew Brennan is a speaker at the China Speakers Bureau. Do you need him for your meeting or conference? Do get in touch or fill in our speakers' request form.

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