Internet giant wants to expand its business into the United States

Supported by strong growth in Asia, China's Internet giant Tencent Holding Ltd is seeing a shift in the demographics of the user base of its WeChat messaging application, as international users start to adopt the popular mobile service.

The company is moving ahead with its overseas plans by setting up an office in the United States, the first overseas unit of its kind targeting the development of WeChat, and marking a critical step for its global outreach.

"Tencent has established its WeChat office in the US to study American users' habits, maintain client relationships and explore business opportunities," the company said in a statement on Monday.

"The US is a challenging but important market for Internet companies. Companies want their products to first succeed in the US, which serves as a gateway to other markets. WeChat is no exception," it added.

While Chinese customers make up the majority of WeChat's user base and the actual breakdown is a closely held figure, the ratio is balancing out much more as global users increasingly adopt the service, said Justin Sun, director of WeChat's international operations at Tencent.

With a focus in Asia, the service's big markets outside the Chinese mainland are in Hong Kong and Taiwan, as well as in Southeast Asian nations such as Singapore, Malaysia, Thailand and Vietnam.

"But we're really growing in the US and in Arabic regions," Sun told the Tech in Asia website, an online technology news startup, in October.

WeChat - which is similar to the US-based WhatsApp and some other mobile apps - enables users to chat via text message, voice and video on their mobile devices as long as they have an Internet connection.

The service gained momentum quickly in China. It surpassed the 300 million users mark less than a week before its second birthday in January.

Its breathtaking success has led to a confrontation between Sina Corp's Weibo, a Twitter-like Web service with 500 million users, and WeChat. During the third-quarter earnings conference call, Sina attributed its lower user stickiness to WeChat's rapid ascent.

WeChat may become a "killer app" thanks to the increasing fragmentation of people's attention spans, according to a research note by JP Morgan.

"We believe the contact list-based multimedia instant messaging application has the potential to become the killer app in the 3G mobile Internet age, similar to what SMS has done in the 2G era," it said.

Before the launch of the US office, Tencent took on a country-by-country approach for local partnerships on the ground, which provide operational help and support along with promotional activities.

According to Sun, Tencent plans to keep WeChat open so it can continue to connect with global services like Facebook, Twitter and Instagram.

It's an "essential move" for Tencent to be in the US and stay close to the market, said Hong Bo, a Beijing-based IT observer.

WeChat's US unit allows Tencent to get acquainted with customers' preferences and keep close ties with local merchants, Hong said.

"But the US market remains the hardest battle to win for most Chinese companies," he added.

Hong believes that WeChat's design is far superior to main rival WhatsApp in terms of several hit functions such as public accounts, which provide a marketing platform for vendors, and Moments, a social section to share photos and updates, which are then visible to all contacts.

Rival apps like Kakao Talk - in which Tencent has a stake - monetize their services by offering ads and opt-in marketing strategies to brands that set up accounts and send messages and promotions to users.

"Tencent signed up a list of top brands, which is a far more sophisticated move compared with its US counterpart," Hong said.

But the main question is whether WeChat will be able to identify local needs, a problem plaguing almost all Chinese Web companies, which are barely known to US consumers, Hong added.

hewei@chinadaily.com.cn

(China Daily 02/26/2013 page15)