How People Are Earning Millions From Tencent’s WeChat — But Not Everyone’s Happy

Forbes

A few years ago, Lin Shao was living a pretty comfortable life in the Chinese coastal city of Xiamen. He’d just landed a well-paid mechanical design job, earning more than many of his fellow college graduates.

But he wasn’t happy. Bored of designing machine parts, he spent his evenings writing a blog about interesting books he’d read on Tencent’s instant-messaging app, WeChat. Before long he spotted an opportunity and decided to give up his job, as the number of people following his blog grew rapidly.

“I like to share what I read with other people,” Lin, now 33, told Forbes. “When WeChat allowed users to have public blogging accounts, I thought this is really my thing.”

And it’s paying off. With more than 22 million WeChat fans, he claims to have made a fortune totaling millions of dollars last year from advertisements placed inside his blog, as well as the proceeds from an in-app bookstore he set up. He isn’t the only one benefitting from the app. With an estimated 980 million monthly active users, WeChat has so many benefits beyond messaging — from online shopping to hailing a cab. But crucially the platform has granted its loyal a huge amount of autonomy — from control over how they attract and maintain a following, to what ads are placed in their public blogs. And this has created potentially lucrative opportunities for savvy users like Lin.

Forbes cannot verify the sums earned by users, as WeChat has not revealed this information publicly.

The sheer scale of WeChat’s media business is enormous. As of 2017, there were more than 15 million in-app public blogs, which both individuals and companies can register and then publish directly to their followers, according to iiMedia, a Guangdong-based consultancy. But unlike Facebook, WeChat doesn’t rely on an artificial intelligence-based algorithm to recommend content — meaning a blogging account only gains exposure when users share articles with their own social circles.  In 2015, the entire WeChat platform was valued at $83.5 billion, and today owner Tencent has reached more than $500 billion in market capitalization — surpassing the value of Facebook.

Tip or in-app purchase?

To people like Lin, WeChat works perfectly well. As China’s younger generation grows tired of the lengthy, often stilted writings of state media as well as other more established news organizations, they are turning to social media for information, often spending hours a day reading inside the app. And with the help of Tencent’s digital payment service Ten Pay, users are even sending their favorite bloggers gifts — often cash — via a function called Zan Shang, or tipping. Zhang Yi, founder of iiMedia Research, estimates that each active blogging account receives a monthly average of 40 yuan($6.3) in these “tips” – which normally range from between 10 yuan ($1.6) to 50 yuan ($7.8) per article — and it’s not unusual to see at least 200 million yuan ($32 million) in transactions processed on a monthly basis, given that there are some five million active blogging accounts, according to Zhang.

“It [Tipping] is a cultural phenomenon,” said Matthew Brennan, founder of consultancy China Channel. “Firstly, it is because mobile payment is very easy in China. Secondly, Chinese people are more willing to pay for content now.”

And this isn’t popular with Apple. The U.S. smartphone giant, desperate to grow its service revenues in China amid a drop in smartphone sales, has been trying for the past year to classify such a tipping system as an in-app purchase, so it can take a 30% cut. Last week, it finally reached an accord with Tencent, agreeing that tipping should be resumed while updating its app store policies to officially include the function.

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Aside from tipping, bloggers also make money from in-app advertisements. While Facebook and Google are facing criticism — including from news mogul Robert Murdoch — for taking the bulk of ad revenue while paying content creators so little, Tencent is putting them to shame. Ads appearing inside WeChat public blogs — which can cost from several thousand yuan to a million each and can be placed multiple times inside an article — are negotiated directly between advertisers and blog owners, with Tencent not taking a cut. Instead, the company generates tens of billions of dollars in annual sales from its gaming business, often relying on WeChat to direct users to hit titles such as Honor of Kings and a localized version of PlayerUnknown’s Battlegrounds.Banner ads of both games are often displayed in users’ social circles, connecting them to outside download links.

“Tencent doesn’t rely on WeChat for revenue,” said Chen Yuetian, a partner at Chinese investment firm S.Capital. “They view the app as online infrastructure. As long as they keep it, they can get users and traffic.”

Attracting investment

In the meantime, the bloggers’ huge followings are even attracting venture capitalists, who are putting money in their media companies so they can offer more services. For example, Lin created a media startup as he hired more people to manage fans and business relationships, which was valued at 400 million yuan ($62.4 million) in a 2017 founding round, with part of the proceeds going into beta test of subscription-based video viewing. KnowYourself, a WeChat-based account about psychology, is connecting its two million followers to outside counseling services.

“The bloggers already have huge followings and they know their audience really well,” said Liu Yuan, an investor at China’s Zhen Fund. “What we hope is that they can monetize beyond advertising.”

But life inside WeChat isn’t always easy. While so-called fake news has plagued Facebook, the threat of censorship is a concern for Tencent.

Last year, Beijing suddenly shut down several dozen WeChat accounts related to entertainment and celebrity gossip, urging Tencent and other companies to “actively propagate core socialist values.” In a further tighten- up of the entertainment industry, authorities are now taking aim at hip-hop, saying “low-taste” content must stop. A campaign is also under way to root out “low-taste” video games.

And this is prompting some bloggers to self-censor. KnowYourself Chief Executive Annabelle Qian said she stays away from discussions on homosexuality and open relationships now, as these topics can be deemed too sensitive by the authorities.

WeChat’s user growth is also slowing down, prompting bloggers to focus more on other platforms. Qian said she now spent a lot of time exploring Jinri Toutiao, or Today’s Headlines — a news aggregation app developed by Beijing Bytedance Technology — because it can help her reach more followers from less developed Chinese cities.

But this doesn’t mean that WeChat is losing appeal. For independent bloggers, the platform is still their largest source of traffic — though Bytedance plans to set aside at least 1 billion yuan ($156 million) to pay bloggers to come to its platform.

“Toutiao is starting to compete toe-to-toe with WeChat’s content platform, ” said Zhen Fund’s Liu. “But as of now WeChat is still much more complex and dominant, and its monopoly on user time gives it a huge advantage over Toutiao.”

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