On Tuesday 15th of January, WeChat blocked 3 competing Apps on their launch day: Liantianbao (聊天宝) – formerly called Bullet Messenger, Duoshan (多闪) – launched by Tencent’s archenemy ByteDance, and Matong MT (马桶MT) – launched by Ringo.AI.
If you are like most people, you are very regular on your posts on Facebook. Now that you have discovered the power of WeChat, you also want to be active on.
- View the profiles of people named Wechat Id. Join Facebook to connect with Wechat Id and others you may know. Facebook gives people the power to share.
- WeChat is legendary as China’s “one-stop” platform. Brand are able to carry out their complete sales cycle all within WeChat: from user acquisition, to payment collection, to customer service. Facebook now is giving a similar CRM experience for brands to connect with its page followers. How is Facebook Messenger doing compare with WeChat?
Is this approach to competition specific to WeChat? To the Chinese market? And how do Chinese and Western companies differ in their growth strategies?
Building companies versus building ecosystems
Chinese and Western companies tend to have a dramatically different approach to expansion. In a few words: Western companies build products, while Chinese companies build ecosystems.
Nowhere is this trend more obvious than in the investment pattern of Chinese and Western companies. Chinese companies tend to be much more active early-stage investors into booming companies.
The purpose of these investments is to build a system of allegiance to the group. After receiving investment, the company will have to ingrate with the ecosystem of the group and reject the competing ecosystem.
As a consequence, Pinduoduo heavily integrates with WeChat and offers WeChat Pay as a recommended payment method, while JD.com doesn’t support Alipay altogether. Both companies of course received investment from Tencent.
Western companies have very different expansion pattern: they tend to rely on acquisitions instead of investments.
These acquisitions can constitute major operations aimed at overtaking superstar products (such as Facebook acquisition of WhatsApp, Instagram and Oculus Rift or Apple acquisition of Shazam last September).
But more often than not, these acquisitions are technology or acqui-hiring operations aimed at developing existing products, such as the acquisition of Redkix by Facebook in July 2018 (which was merged with Workplace by Facebook) or the purchase of Senosis by Google in September 2018 (which was merged with Nest Lab).
Guerrillas and castles
The approach of Western tech companies to competitive warfare is akin to protecting a castle: they have a defined territory and will relentlessly protect it if the adversary gets close enough. Their acquisition strategy is meant to build stronger defenses against their enemy. But they will likely stick to this territory and make limited foray outside of their core domain of expertise.
Chinese tech approach to competition is more similar to guerrilla warfare: fights happen everywhere, all the time, between a large number of stakeholders both big and small.
As such, foreign companies tend to be much more permissive toward other tech players leveraging their tools. For instance, there is no problem for a Facebook post to link toward an Amazon link, and Google will of course direct you to a relevant Facebook profile.
How WeChat and Alibaba approach competition
WeChat famously blocks any link to Taobao (and the other way around), while also preventing sharing from Douyin (which belongs to the competing Bytedance/Toutiao ecosystem).
Weibo (which received investment from Alibaba and is part of its ecosystem) is more subtle about blocking WeChat: posts mentioning WeChat or featuring WeChat QR codes will just receive no engagement from users as they won’t be picked by the Weibo algorithm.
The case this week of WeChat blocking the social media apps Duoshan, Duoliaotian and MatongMT is just another example of this very defensive approach to competition.
Did Facebook block competitors?
Of course Chinese tech giants are not the only companies with an history of blocking competition. A prominent example would be the case of Facebook blocking short-video platform Vine in 2013.
This is however quite a different story than WeChat blocking Douyin: Facebook merely blocked the friend-finding feature from Vine (preventing it to access users contact list). Vine users were still able to share their short-videos on Facebook (which is clearly not possible between WeChat and Douyin – Douyin had to offer a workaround suggesting users to download the video and re-upload it to WeChat with a Douyin watermark).
Another prominent case of Facebook blocking another competing App was the block of Tsu in 2015: a social network which was directly rewarding users for views on their content and for inviting new users.
Photo credit: zdnet.com
However, the case of Tsu is also entirely different: because it was giving money in exchange for views, Tsu was used mostly by e-marketers and spammers in order to make a quick buck. The network closed soon after, in 2016, as it failed to raise another funding round to support its apparently unsustainable business model.
A more direct case of “block” of competition happened in 2015 when Amazon decided to stop distributing Apple TV and Google Chromecast, which did not offer Amazon Prime Video streaming services. Amazon however chose to deescalate the fight last year, in December 2017, and announced that it would offer both devices again for sell on its platform.
Overall, although Western companies also can block competitors, they seem less likely to do so, and appear to do it with more focus on user experience than extinguishing their competition.
But… which strategy works best?
There is little doubt that Facebook acquisition strategy has been incredibly successful. The poster child of this success is Instagram.
Facebook was widely criticized for overpaying for Instagram, acquired at a 1 billion USD price tag in 2012. The App is now expected to generate between 8 to 9 billion USD of revenues in 2018 alone. A pretty good return of investment, and this doesn’t take into account the strategic edge that Instagram provided against rival Snapchat.
According to Recode, Instagram could make up to 30% of Facebook total revenue by Q4 2020.
Because Chinese tech companies have a much more complex strategy of multiple, disparate investments, it is much harder to assess success. Tencent listed investees amounted to $36 billion in value as of Q2 2018, but the value of these investments goes well beyond this listing price.
As we discussed, many of such investments played into a sophisticated fight against arch-rival Alibaba and new rival ByteDance. It is likely that they contributed significantly to the rise of Tenpay / WeChat Pay, which rose from a 10% market share to around 40% in 2018 according to various estimates.
Stuck in a prisoner’s dilemma?
The habit of Chinese tech companies is reminiscent of the prisoner’s dilemma, a foundational concept of Game Theory first described by John Nash (and brought to popular culture in the movie “A Beautiful Mind”)
The prisoner’s dilemma imagines two prisoners kept in a jail. Each prisoner is given the opportunity either to betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The offer is:
- If A and B each betray the other, each of them serves two years in prison
- If A betrays B but B remains silent, A will be set free and B will serve three years in prison (and vice versa)
- If A and B both remain silent, both of them will only serve one year in prison (on the lesser charge)
This is exactly the situation that Chinese tech companies have ended up into: they can choose to cooperate and avoid damage to each other (and make a better experience for all end users). But they are so afraid of being betrayed that they end up resorting to hostile behaviors.
Of course, the math also says that, in a repeated game with reputation involved, betraying is not the only solution. At the end of the day, it is a choice that Tencent, Alibaba and ByteDance keep making every day.
Western and Chinese Tech companies approach competition in very different ways. As of today, it is hard to tell which way works best: Tencent, Google, Alibaba and Facebook are all incredibly successful companies with skyrocketing valuations.
One thing seems clear: these differences will likely become clearer and clearer in the future, as Chinese tech companies get entrenched in a guerrilla spreading over many industries and hundreds of invested companies.
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Last week, in response to Australia’s proposed media bargaining code, Facebook effectively halted all posting of links from Australian news pages and stopped people in Australia from posting or viewing international news as well.
The change, which has sent publishers’ traffic tumbling, happened overnight, and may be undone if either Australia or Facebook backs down. But if the current situation continues, it may leave Facebook operating much more like the Chinese platform WeChat, where news is ruled by platform-specific content houses cranking out huge volumes of low-quality articles. And that might suit Facebook quite well — if not the public.
What is WeChat?
WeChat is the major social media platform in the People’s Republic of China. It’s also used by many people around the world, including in Australia. While China and Australia have very different political systems, this shouldn’t stop us paying attention to their similarities.
WeChat is as privately owned as a company can be in China, and is often described as the Chinese Facebook. But WeChat is an even more pervasive platform, combining its own set of built-in tools, payment services, and communications networks with a range of optional apps and utilities, from messaging services to games and more.
In short, WeChat does everything. Because of this, entire news organizations have set up inside the platform. These are known as WeChat Official Accounts (WOAs), and are roughly equivalent to “blue tick” accounts on other platforms such as Twitter.
If Facebook’s Australian news embargo continues, we think something like the WeChat model might develop there. In our research, we have shown it’s very common for features and interface elements to move between English and Mandarin digital media.
People might have a general idea that some aspects of U.S.-based social media have been reproduced by Mandarin language services (such as WeChat’s Instagram-copying “Moments” product), but the copying goes both ways. The stickers, GIFs, QR codes, live commenting, and direct messaging used by the likes of Faceboook, Twitter and LinkedIn were copied from WeChat, Weibo and Bilibili.
How news works on WeChat
Countless media entrepreneurs have set up WOAs since they were launched in August 2013. These accounts produce millions of news posts every day, and unlike traditional media outlets posting on Facebook, these posts are not accompanied by external links to a version of the article hosted elsewhere. WeChat is their whole audience, and they make money by renting out advertising space within their articles.
One of us (Fan Yang) conducted research with 24 Australian-Chinese employees of WOAs. These organizations appear to employ far fewer journalists than traditional media — and sometimes none at all. There are already many Australian-run WOAs operating almost entirely with short-term interns, most of whom do not identify themselves as professional journalists. Instead they are content producers translating published English news into Mandarin and reappropriating stories with editorial spin.
These organizations largely rehash existing news content, often with clickbait headlines and exaggerated accounts of events. Stories are often aggregated from multiple news sources, or simply copied entirely, perhaps being passed through an automated translation service twice to avoid directly reproducing sentences.
From the fringes to the mainstream
If we were to see the development of platform-specific Facebook news services modeled on the WeChat system, only a handful of media workers would be needed. They would perform multiple roles as writers, editors, marketers, content producers, and translators.
As these jobs might only require marginal professional experience in a specific field (such as politics, lifestyle, sports, or nature and environment), the work could be outsourced to places or regions where the labor cost is lower.
With the shrinking readership and advertising revenue in the traditional news industry, content farms and outsourced journalism have already become a common way to churn out a high volume of speedy and inexpensive content. Many fringe groups already operate this way on Facebook, run by anti-vaxxers, flat-Earthers, white supremacists and more. In the absence of more traditional news on Facebook, there is no reason this model couldn’t spread further.
When comparing China and Australia, we often think of divisions such as China’s shutdown of the “foreign” internet since 2009 and the current diplomatic and trade tensions. However, both nations have seen similar shifts in the way that information is controlled on their dominant platforms, and both have high levels of media concentration.
Whether the changes to Facebook will lead to increased levels of WeChat-style platform-specific news production houses, or an increased visibility of those that already exist, remains to be seen. This may depend on how independent and startup media find a way forward, although we believe the WeChat model may be successful for some.
We would suggest, however, that there are already two key messages to take away from the current situation. The first is to note that while regulation of social media is possible, political will is largely absent without the support of incumbent media organizations. This can be seen in the deals Google has recently established with several media companies.
Face Chat Apps
Also, only Google and Facebook have been the focus of the media bargaining code so far. Can we expect regulation of Reddit, Discord, TikTok, WeChat, Twitter, or even MySpace and Ello? What about news platforms that link to other news platforms? These developments have not yet played out.
The second is that Facebook will defend its capacity to operate on its own terms, and will fight hard to prevent either states or competitors dictating how its services operate or how it governs content. Despite Facebook refusing to accept journalistic outlets as formal competitors (as this would likely invoke various national oversight mechanisms for journalistic content), they are nonetheless in competition for audiences and advertising.
Anything that could shift people into Facebook-specific news-advertising contexts with independent editorial teams would be a highly desirable outcome for the platform.
Wechat Facebook Verification
Fan Yang is a Ph.D student at Deakin University in Australia. Robbie Fordyce is a lecturer in communications and media studies at Monash University in Australia. This article is republished from The Conversation under a Creative Commons license.