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TECHNOLOGY

Tencent invests heavily in WeChat Channels in an attempt to create its own TikTok.

On a hot summer day last year, the Backstreet Boys climbed onto a stage in Pennsylvania and sang hits while 44 million people from thousands of miles away watched the online concert hosted by China’s WeChat Channels.

The show is just one of many events that WeChat’s owner, Tencent, has put on to promote the app’s short-video platform, which WeChat’s founder, Pony Ma, has called “the hope of the company.”

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Tencent Holdings Ltd. (0700.HK) has also hired Taiwanese singer Jay Chou and Irish boy band Westlife for livestreamed concerts. According to a source, the company has set up a team to build a community of content creators as it tries to compete with ByteDance, which owns TikTok and Douyin, and Kuaishou in the short-video business.

Related: China will buy 44 foreign video games and give Tencent a number of licences to do so.

“Tencent wants Channels to become the next WeChat Pay. It has a chance. But it will also be difficult. A senior analyst at the research firm Analysys, Liao Xuhua, said this.

Within a year of its launch in 2013, WeChat Pay was the second-biggest player in China’s mobile payment market, behind Alipay, which is owned by Ant Group, which was started by Jack Ma.

According to two people familiar with Tencent, the importance of Channels has been discussed extensively within the company.

The two-year-old platform has been a bright spot for Tencent in an otherwise bad year, 2022, when tighter gaming regulations and strict COVID-19 curbs hurt revenue for its other products, like games and payment services.

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Last year, the total number of views on Channels went up by more than three times, Tencent said this week when it shared the platform’s latest growth numbers.

Daily active creators and video uploads have grown by more than 100%.

Gross merchandise value (GMV) from livestreaming e-commerce, where telegenic people sell things online in real time, jumped more than 800% on Channels, the company said.

It did not disclose absolute figures.

According to a LatePost report, for the first time in September 2022, livestreamed sales pitches on Channels brought in more than 100 million yuan ($15 million) per day.This is equivalent to about 36 billion yuan a year.

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Sources said at the time that Douyin already had plans to bring its GMV to over 1 trillion yuan ($155 billion) in 2021, which would be a six-fold increase from 2020 levels. ByteDance does not share official GMV numbers with the public.

INTEGRATING PRODUCTS

Tencent has integrated many of its products, such as Tencent Meetings and the WeChat Mini Program, with Channels to assist creators livestreaming content such as the American band Backstreet Boys.

Tencent Meetings is a teleconference service similar to Zoom. Mini programmes, on the other hand, are like apps on Apple’s iOS and Google’s Android, but they use less data and run inside WeChat.

A podcast host, for example, could do an interview in Meetings and livestream it on Channels if the two apps worked together. If the host recommends a product during the chat, a link can pop up on the screen that takes viewers to a mini programme where they can buy the product using WeChat Pay.

Tencent has also lowered the number of followers you need to start making money on Channels. Before, you needed 1,000 followers to start making money through ads, but now you only need 10.

To start making money on TikTok, content creators need to have more than 10,000 followers.

Li Yikai, general manager of Americas and EMEA at ad agency Nativex, said that Channels has opened up advertising opportunities “like never before.” This is in contrast to WeChat, which only pushes a few ads a day.

“When you’re already scrolling and see an ad, you don’t give it a second thought.” “So it makes sense that you see many more ads with short videos,” Li said.

Martin Lau, the president of Tencent, said in November that advertising revenue from Channels was on track to hit 1 billion yuan in the fourth quarter of 2022.

Insider Intelligence, a research company, said in April 2018 that TikTok and Douyin’s ad sales would bring in more than $30 billion by 2022.

Channels has also started charging online stores a commission fee of 1% to 5% as of this month.

Since 2020, Douyin has charged between 1% and 10%.

RIVALRY

Some analysts think Channels is Tencent’s best chance to catch up to ByteDance, but others think it won’t be as big as Douyin, which is the Chinese version of TikTok.

“When you have to start as a social network app and then move into the short-video space, you have to build a whole e-commerce system to support it.” “I’m not saying they can’t get there, but it’s very hard,” Analysys Liao said.

Related: Tencent focuses on majority deals and gaming assets overseas to grow.

But Shawn Yang, who is in charge of research at Blue Lotus Capital Advisors, is optimistic about Channels because of how much traffic WeChat could bring.

The most popular chat app in China is WeChat, which has more than a billion active users.

“For instance, you can’t ask your Douyin or Kuaishou viewers to add you on WeChat. “You can quickly add someone on WeChat through channels,” Yang said.

“Those who already have their own private traffic on WeChat will benefit a lot from this,” he said.

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