Something "Weixin" is Threatening Facebook in China

A Whole New Technology for A Whole New World

Weixin (pronounced way-shin) is this country’s killer app, a highly addictive social networking tool that allows smartphone users to send messages and share news, photos, videos and web links, much like America’s WhatsApp, or Line, a Japanese communications and messaging app. In the United States, a similar version is known as WeChat.

Just three years after being introduced in China, Weixin has nearly 300 million users — a faster adoption rate than either Facebook and Twitter — giving the app a dominant position in what is now the world’s biggest smartphone market. It has already stopped the growth of the messaging service of the country’s biggest mobile phone company and provoked China’s largest Internet companies to create competing services.

But in the free-for-all in China, one leading social media company is not a factor. Analysts say the phenomenal rise of Weixin all but dooms any chance that Facebook will become the market leader there.

In 2009, the Chinese government blocked access to Facebook, without explanation. Twitter and YouTube are also blocked in China.

Since then, Facebook has hinted that it may try to re-enter the market, perhaps by teaming up with a local company. Weixin’s success has made that all the more difficult.

“Even if Facebook had permission, it’s probably too late,” says Wang Xiaofeng, a technology analyst at Forrester Research. “Weixin has all the functionality of Facebook and Twitter, and Chinese have already gotten used to it.”

Weixin is the creation of Tencent, the Chinese Internet powerhouse known for its QQ instant messenger service and its popular online games. Tencent, which is publicly traded and is worth more than $100 billion on the Hong Kong exchange, is now seeking to strengthen that grip in social networking and expand into new areas, such as online payment and e-commerce.

Alibaba, China’s e-commerce goliath, has already announced plans to fight back in China, with its own newly developed messaging app, called Laiwang.

Tencent, meanwhile, is so confident of its messaging app that it is promoting Weixin overseas, particularly in Southeast Asia, where there are already tens of millions of users. The company also plans a marketing blitz in Europe and Latin America, using the name WeChat. The company declined to say whether or when it would promote the service in the United States.

Weixin could help change global perceptions of Chinese companies. Although Chinese Internet companies are still considered knockoffs of Google, Facebook, Twitter and eBay, analysts say they are quickly transforming themselves into dynamic, innovative technology companies with unique business models.

Weixin, for instance, is no mere copy of an existing service but an amalgam of various social networking tools: part Facebook, part Instagram and even part walkie-talkie. Rather than send a short mobile phone message by typing Chinese characters, which can be time-consuming, users simply hold down a button that records a voice message.

Analysts say that technology shifts often kill companies that are slow to react. But the threat of extinction can also inspire companies to reinvent themselves, or to search for the next great thing.

That is what happened at Tencent, which has been growing at a torrid pace for much of the past decade. Fearing the development of a disruptive technology that could upend this success, Tencent executives say they encouraged the company’s software developers and product managers to search for new ideas.

Weixin, technology experts say, has what every Internet company executive dreams about: stickiness. Although Tencent does not track the time that users spend on the service, analysts say it is most likely multiples of other major blogging or social media services.

Analysts say Tencent also has a huge opportunity to make money from the free service. By introducing free mobile games — with virtual items available for purchase — and a payment feature that can be used online or offline, Weixin could soon develop into a profitable business with little or no advertising.

The company is now experimenting with use of Weixin to book taxis, hotels and airline flights, and even to control televisions and home appliances. Last August, a technology analyst at Barclays forecast that Weixin could have 400 million users and nearly $500 million in revenue this year. With investors anticipating such growth, shares of Tencent have soared 94 percent in the past year.

Some Tencent executives even view Weixin as a company savior. Last year, Tencent’s chief executive and co-founder, Ma Huateng — known in English as Pony Ma — said during a speech that the power of Weixin was that it was mobile, like a “portable organ” that unlike a PC was always with the user.

There are challenges, of course. One, analysts say, is that China’s tech-savvy young people are fickle, and could just as quickly switch to other messaging services. Another challenge could come from Tencent’s rival Alibaba, the Chinese e-commerce company that has all but declared war on Weixin.

Last August, Alibaba barred vendors on its Taobao.com shopping site from using Weixin to market their products. Alibaba then introduced its competing service, Laiwang, and announced plans to introduce a mobile games platform.

Tencent’s overseas expansion plans could also be hampered by concerns about a Chinese company’s handling so much personal information, and then being forced to turn it over to the Chinese authorities, which have tight controls over Internet services.

Tencent executives insist the risks of spying are small because the company does not store messages on its servers.

Access to Facebook may now be blocked in China, but the American company is selling advertising to Chinese companies and considering re-entering the market.

“We are interested in China but have made no decisions about how we will approach it,” a company spokeswoman said this month.

For now, Chinese consumers are flocking to Weixin, seemingly glued to it. At work, on subways and in restaurants, one can hear the increasingly familiar ping of a new Weixin message being received.

Stephanie Yifan Yang contributed research Excerpts from NYtimes.com