Tencent bets big on WeChat Channels in push to build its own TikTok

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HONG KONG — On a hot summer’s day last

year, the 90’s boy band Backstreet Boys clambered on to a stage

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in Pennsylvania and belted out hits as 44 million viewers tuned

in from thousands of miles away for the online concert hosted by

China’s WeChat Channels.

The show is just one of many events held by WeChat owner

Tencent to promote the app’s short-video platform – described by

the tech giant’s founder Pony Ma as “the hope of the company.”

Tencent Holdings Ltd has tapped other entertainers

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too like Taiwan’s Jay Chou and Irish boy band Westlife for

livestreamed concerts and, according to a source, has set up a

team to build a community of content creators as it seeks to

challenge the dominance of ByteDance, the owner of TikTok and

Douyin, and Kuaishou in the short-video business.

“Tencent hopes it can turn Channels into the next WeChat

Pay. It has a shot at it. But it is also going to be difficult,”

said Liao Xuhua, a senior analyst at research firm Analysys.

WeChat Pay became the second-biggest player in China’s

mobile payment market within a year of its 2013 launch, behind

Alipay which is owned by Jack Ma-founded Ant Group.

Two sources familiar with Tencent said the importance of

Channels has been repeatedly communicated within the company.

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The two-year old platform has been a bright spot for Tencent

in an otherwise dismal 2022 when revenue for its other products,

such as games and payment services, were slammed by tighter

gaming regulations and strict COVID-19 curbs.

The total number of views on Channels surged more than

three-fold last year, Tencent said this week as it revealed its

latest growth figures for the platform.

Daily active creators and video uploads more than doubled.

Gross merchandise value (GMV) from livestreaming e-commerce,

where telegenic personalities hawk goods online in real time,

jumped more than 800% on Channels, the company said.

It did not disclose absolute figures.

A LatePost report says Channels’ daily transactions from

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livestreamed sales pitches reached more than 100 million yuan

($15 million) in September 2022 for the first time, indicating

an annual rate of about 36 billion yuan.

But Douyin was already aiming to bring its GMV to over 1

trillion yuan ($155 billion) in 2021, a six-fold jump from 2020

levels, sources said at the time. ByteDance does not publicly

disclosee official GMV numbers.

INTEGRATING PRODUCTS

Tencent has been integrating many of its products, ranging

from Tencent Meetings to WeChat Mini Program, with Channels to

help creators livestream content just like the U.S. band

Backstreet Boys.

Tencent Meetings is a Zoom-like teleconference service while

mini programs are like apps on Apple’s iOS and Google’s Android

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operating systems but less data intensive and run within WeChat.

An integration would allow, for example, a podcast host to

conduct an interview on Meetings and livestream it on Channels.

If the host recommends a product during the chat, a link can pop

up on the screen to take viewers to a Mini Program where they

can buy the product using WeChat Pay.

Tencent has also slashed the threshold for monetisation on

Channels, allowing users with as few as 10 followers, versus

1,000 earlier, to start making money through advertisements.

TikTok requires content creators to have more than 10,000

followers to start monetising.

Channels has also opened up ad opportunities “like never

before,” said Li Yikai, general manager of Americas and EMEA at

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ad agency Nativex, versus WeChat that pushes a few ads a day.

“When you are already scrolling and come across an ad, you

don’t think twice about it. So naturally you come across a lot

more ads with short videos,” Li said.

In November, Tencent President Martin Lau said Channels’

advertising revenue was on track to reach 1 billion yuan in the

fourth quarter of 2022.

For TikTok and Douyin, research firm Insider Intelligence

estimated in April last year that ad revenues would together

reach more than $30 billion for 2022.

Channels has also started charging e-commerce merchants a 1%

to 5% commission fee from this month.

Douyin has been charging 1% to 10% since 2020.

RIVALRY

While some analysts see Channels as Tencent’s best chance to

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catch up with ByteDance, others believe it will be tough for it

to become as big as Douyin, the Chinese version of TikTok.

“When you have to start from being a social network app and

then enter into the short-video space, you have to build up a

whole e-commerce system to support it … I won’t say they can’t

get there but it’s very difficult,” Analysys’ Liao said.

But Shawn Yang, managing director at research group Blue

Lotus Capital Advisors, is bullish on Channels given the

potential of WeChat’s traffic.

WeChat, China’s most popular chat app, has more than a

billion active users.

“For example, in Douyin or Kuaishou, you won’t be able to

ask your viewers to add you on WeChat. But on Channels, you can

quickly add somebody on WeChat,” Yang said.

“This is very beneficial to those who already have their own

private traffic on WeChat,” he said.

($1 = 6.7348 Chinese yuan)

(Reporting by Josh Ye; Editing by Brenda Goh and Himani Sarkar)