The hidden concerns behind the success of WeChat

What is WeChat? Image: TheDailyExposition, Flickr, All rights reserved.

 

  • Introduction:

 

According to Matthew Fulco (2017) at the Cheung Kong Graduate School of Business, in the age of mobile internet, WeChat mostly represents the textbook model of a platform business. It is the most prominent platform for transforming a pure messaging app. In fact, WeChat has transformed itself to a multi-purpose mobile platform spanning media sharing, voice and video calling, messaging, gaming, online payments, etc. It is commonly referred as ‘app for everything’ in China. By integrating its platform with users’ daily lives and lifestyle with the greater convenience and accessibility, WeChat has not only changed the way people interact and socialise, but also redefine the breadth of internet-based services and the depth of users engagement.

Nevertheless, there are many hidden concerns behind the success of WeChat. Economically, WeChat creates a kind of digital business governance which facilitates Internet companies in gaining profits through commodifying and exploiting the attention of its users (Peng 2017). Socially and culturally, WeChat has significantly intensified the existing division in the real world and further contributed to social fragmentation and polarisation (Damm 2007). Politically, WeChat colludes with the Chinese government to ensure that digital media does not threaten the legitimacy of the authoritarian regime (Rød & Weidmann 2015). Its transfer and payment practice have also caused security and legal concerns.

 

Source: Wall Street Journal on Youtube. China’s WeChat Gaining Global Attention

 


 

  • Historical overview:

 

As previously discussed, WeChat is an app for everything. Due to limitation in length, this blog post only focusses on two key historical developments of WeChat.

In 2012, WeChat has launched media posting and sharing which called WeChat Moments. The WeChat Moments is a private and exclusive network which only focus on users’ self-centred community and it strictly confines unsolicited access and comment to post and pictures (Damm 2007). This blog post will later elaborate on how WeChat Moments reinforce the comfort zone of socialisation and widen the cognitive gap across different groups of population.

In 2013, WeChat has launched major revolutionary features named WeChat Payment. WeChat Payment evolved from virtual red envelope which was adopted from the Chinese tradition of exchanging red envelopes during important festivals. WeChat payment later becomes a built-in digital wallet of WeChat, which provides users with fast-track mobile payments and transfer. According to China Channel, for now, WeChat payment is widely used and accepted in retail sectors in China. However, this development also leads to infringement of privacy, potential financial loss and criminal activities such as money laundering and bribery. All of which will be examined later in this blog post.

 


 

  • Ownership and business model

WeChat is one of the six core business groups and flagship product of Tencent and it was originally created and currently managed by a software engineer named Zhang Xiaolong (Tencent 2016).

 

Tencent-the parent company of WeChat. Image: TheDailyExposition, Flickr, All rights reserved.

 

Among the hundreds of service offered by WeChat, this blog post focus on the most prominent social media business. While the use for WeChat is free of charge, the attention users spent on WeChat is a source of value and reason for WeChat’s commercial success (Gerlitz & Helmond 2013). According to Dallas Smythe (1981)’s idea of the audience commodity, the consumption of social media like WeChat is subsumed by commodity production. As the service is consumed, new digital commodity which is the accumulated attention from the audience is produced and then can be sold to advertisers for gaining profits, consequently forming a twofold commodification (Manzerolle & McGuigan 2014). Notably, in the terms of service, WeChat made it clear that they have the rights to deliver customised advertisement based on users’ personal information and require users to consent to this before use WeChat (Tencent, 2014b). According to Tencent shareholder report in 2014, the revenues from mobile advertising increased by more than 60 percent comparing with the previous year. The way that WeChat to increase profitability is an application of the attention economy. Due to the scarcity and desirability, attention becomes a limited and exchangeable commodity (Goldhaber 2006). In this case, Internet companies gain profits from attracting social media users’ attention (Goldhaber 2006). Hence, the corporate capital accumulation model of WeChat is based on two aspects. One is the exploitation of WeChat users’ attention and the other is commodification of user-generated information which is consequently sold as commodities to advertisers.

 


 

  • Internet Ecology

WeChat dominates the industry in terms of scale and revenue. Statistically, according to Tencent report (2015), WeChat is the mobile app with the most monthly active users in China. As of March 2018, WeChat accounts for over one billion active monthly users. It has successfully covered more than 98% of smart phones users in China. Regarding value and revenue, the entire WeChat platform was valued at $83.6 billion in 2015. More surprisingly, WeChat’s average revenue per user (APRU) is estimated to be at least $7, which is the highest of all apps.

Regarding competition, China’s Great Firewall blocks free entry of global business into the Chinese market, forming an internet service market which competition only happens between native companies. Local social media like Weibo and online payment service like Alipay are major competitors for WeChat. Despite WeChat and Weibo are competing for advertiser budgets, they are not competing in terms of functionality because WeChat is a more exclusive friend circle than for broadcasting information. In terms of competition between Alipay and WeChat, both offer broadly similar service and the difference is that WeChat is focused on smart phones while Alipay covers smart phones, tablets and computers.

 

Sign of WeChat pay and Alipay at cashier desk. Source: N509FZ, Wikimedia Commons, All Rights Reserved

 

Tencent has heavily invested in retailers and service providers. The partnership between social channels and e-commerce has been a defining character of recent development for Tencent. Two prominent cases are JD.com which is the second biggest e-commerce retailer in China and Meituan Dianping which is the largest food-delivery in China. WeChat facilitate sales as it not only provides fast-track payment but also enable retailers to take advantage of huge volume of traffic coming through the WeChat.

Products on JD.com are showing up on WeChat’s search results. Image: Technode, Nicole Jao, https://technode.com/2018/06/14/wechat-jd-shopping/, All Rights Reserved.

In contrast to conventional mass media, in the era of Web 2.0, the task to produce and circulate shifts from central institutions to individual Internet users (Kaplan & Haenlein 2012). In the case of WeChat, as most users are engaged in actives such as making their own profiles, sharing their life experience, commenting on friends’ Moments updates, all of the original content is intentionally and voluntarily created and distributed by users themselves. As users normally feel that they are in charge of what, when and where they choose to post, this results in a form of psychological satisfaction and users are more attracted to the platform (Dean 2010). In this case, users’ role as suppliers of the services is enhanced.

China’s digital regulation is unique because Chinese Ministry of Industry and Information Technology imposes strict control and censorship on the media platform. In this context, the digital governance of WeChat is heavily affected by state rules. For instance, in WeChat’s terms of service, any activities that involve criticism of ‘socialist system’ or conflicts with ‘socialist ethics’ will result in serious consequence (Tencent, 2016). Additionally, WeChat has conducted activities of self-regulation. It automatically censors and blocks content with politically blacklisted phrases and it will suspend accounts if inappropriate content is found several times (Ho 2008). Clearly, WeChat serves as tools for the authoritarian regime to suppress the freedom of speech (Rød & Weidmann 2015).

 


 

  • Diagram

 


 

  • Transformative effects.

 

Social Media

Unlike the micro-blog services which designed to broadcast to as many audiences as possible, WeChat is a user-centred social communication network. Therefore, the user’s WeChat circle of friends is acquaintance-oriented and it forms a relatively closed social circle. In this circle, shared information such as comment, like, photo creates a unique cultural form of WeChat. This commonly refers to a kind of ‘circle culture’ or subculture with low openness, low participation, and strong connection among the participants (Harwit 2017).

 

Circle culture? Image: Kinh nghiệm Tin học, Flickr, All rights reserved.

 

On the one hand, the existence and development of WeChat’s ‘circle culture’ are conducive to the development of user interaction (Harwit 2017). In addition to the relationship established based on family ties, WeChat users and their friends share more commonality in terms of interest, geographical location and age group. Based on these characters, the frequency of interaction between users is high, the intensity of emotion between users is strong, and the cognitive barriers are limited. All of which are conducive to mutual understanding and deep engagement.

On the other hand, WeChat’s circle of friends is characterised by its high degree of closeness and narrow scope, and it often breeds a culture of addiction (Wang & Gu 2016). As WeChat reinforces the comfort zone by creating a world in which users feel familiar to others and making user at ease in this self-centred community, the willingness and motivation for people to deal with outside world is weakened, and users will be more dependent to interact within this circle, and even actively ignore and avoid communication and interaction with the world outside the circle (Wang & Gu 2016). Some users can only know who they are by keeping WeChat online. Once WeChat is logged off, they face difficulties in making genuine friends so they have intensified their indulgence on WeChat. This forms a vicious circle of ‘more WeChat, more alienation’ (Wang & Gu 2016). Additionally, due to its strong social connection character, the spread of false information and fake news on WeChat has its own implications. The credibility of rumours, the possibility to spread rumours and the negative effects of rumours are all enhanced (Chen et al. 2018).

More generally, this narrow-mindedness contradicts with the fundamental essence of society (Damm 2007). WeChat makes individuals to fixate on a little group of intrigue and just care themselves away from society and this continuous disengagement of public activities will undermine social solidarity and general consensus (Damm 2007). WeChat’s character and capacity to construct online discourse into small and discursive collection of like-minded people only result in small-scale social action. In the view of Roberts et al. (2013), this pattern may fit well with the authoritarian regime’s goal to break down collective action and isolate individual criticism.

 

 

Red envelop and WeChat Payment

 

WeChat transfer and payment. Image: Fastcompany, Eveline Chao, https://www.fastcompany.com/3065255/china-wechat-tencent-red-envelopes-and-social-money, All Rights Reserved.

 

With the launch of the WeChat payment, users can complete a series of online purchase such as movie tickets, mobile recharge, utilities, flight tickets, etc. WeChat payment integrates many seperate purchases into one, which greatly meets the diverse needs of users (Qu et al. 2015). Nevertheless, user’s privacy is at risk through their use of WeChat payment (Wang et al. 2016). WeChat payment stores the user’s binding banking card, real-name and mobile phone number and other sensitive personal information. While the current WeChat payment does not address possible steal by third-party software on the user’s mobile phone. The lack of information protection mechanism has the risk of personal information leakage and financial loss.

The WeChat red envelope is broadly similar with other financial products. It includes flow of funds from one party to the other. However, the legal supervision of depositing and transferring funds in the WeChat red envelope is not fully in place and this may lead to criminal activities such as illegal fund-raising, money laundering and bribery (Wang et al. 2016). As an electronic version of the red envelope, it has the function of ‘gifting’ and it is not limited by time and location. Although WeChat red envelope requires real-name authentication, the implementation is not fully in place and false certification is also possible (Wang et al. 2016). In this context, there is no factual record between the person who sent the red envelope or transfer money and the person who receive it. So it is more concealed and becomes a better tool for criminal activities.

In addition, for users who do not link their WeChat account with their real-named bank cards, the money in the red envelope and money transfer cannot be withdrawn and will be deposited in the payment platform for 24 hours. Due to the large scale of WeChat payment user, the platform will accumulate significant amounts of funds. Nevertheless, WeChat does not have the same savings license as commercial banks and this kind of public fundraising has caused legal concerns (Wang et al. 2016).

 


 

  • Final words

The widespread popularity and prevalence of WeChat as an essential part of digital transformation in China and beyond has empowered the platform with unprecedented influence. However, this influence without necessary check is certainly concerning. Its services greatly intensified the existing division in the real world and contributed to social polarisation and atomisation. The platform never considers the exclusion faced by the poor, the uneducated, the rural migrants, the LGBT community and etc. Moreover, through their terms of use and near monopoly status, WeChat maximise its profit though commodifying the attention of its users and exploiting the data generated by its users. Politically, WeChat facilitates Chinese government’s threat on freedom of speech and uses its influence to control users’ privacy and construct new privacy norms. Additionally, its transfer and payment service have also caused security and legal concerns. Indeed, despite the commercial success of WeChat, there is still significant room for improvement in political, economic and social terms.

 

 

Academic References:

Chen, Y, Liang, C & Cai, D 2018, ‘Understanding WeChat Users’ Behavior of Sharing Social Crisis Information’, International Journal of Human-Computer Interaction, vol. 34, no. 4, pp. 356-366.

Chen, Z & Cheung, M 2018, ‘Privacy perception and protection on Chinese social media: a case study of WeChat’, Ethics and Information Technology, pp. 1-11.

Damm, J 2007, ‘The Internet and the fragmentation of Chinese society’, Critical Asian Studies, vol. 39, pp. 273–294.

Dean, J 2010, Blog theory: Feedback and capture in the circuits of drive. Cambridge: Polity.

Fulco, M 2017, ‘The WeChat economy, from messaging to payment and more’, Cheung Kong Graduate School of Business, Retrieved from http:// knowledge.ckgsb.edu.cn/2017/08/28/mobile-commerce/wecha t-economy-messaging-wechat-pay/.

Gerlitz, C & Helmond, A 2013, ‘The like economy: Social buttons and the data-intensive web’, New Media & Society, vol.15, no.8, pp. 1348-1365.

Goldhaber, M 2006, ‘The value of openness in an attention economy’, First Monday, vol. 11, no.6.

Harwit, E 2017, ‘WeChat: social and political development of China’s dominant messaging app’, Chinese Journal of Communication, vol. 10, no. 3, p. 312.

Ho, P 2008, ‘Self-imposed censorship and de-politicized politics in China: Green activism or a color revolution?’, in China’s embedded activism: Limitations and constraints of a social movement, New York.

Kaplan, A & Haenlein, M 2012, ‘Social media: back to the roots and back to the future’, Journal of Systems and Information Technology, vol.14, no.2, pp. 101-104.

King, G, Pan, J & Roberts, M 2013, ‘How censorship in China allows government criticism but silences collective expression’, American Political Science Review, vol.107, pp. 326–343.

Manzerolle, V & McGuigan, L 2014, The audience commodity in a digital age: Revisiting a critical theory of commercial media. Peter Lang Publishing, Incorporated.

Peng, Y 2017, ‘Affective networks: how WeChat enhances Tencent’s digital business governance’, Chinese Journal of Communication, vol. 10, no. 3, pp. 264.

Qu, Y, Rong, W, Ouyang, Y, Chen, H & Xiong, Z 2015, ‘Social aware mobile payment service popularity analysis: the case of wechat payment in China’, Asia-Pacific Services Computing Conference, Springer, Cham.

Rød, E & Weidmann, N 2015, ‘Empowering activists or autocrats? The Internet in authoritarian regimes’, Journal of Peace Research, vol. 52, pp. 338–35

Smythe, D 1981, ‘On the audience commodity and its work’, Media and cultural studies: Keyworks, pp. 230-56.

Tencent 2014b, WeChat: Privacy policy, Retrieved from http://www.wechat. com/en/privacy_policy.html

Tencent 2014a, Tencent holdings limited 2014 annual report. Retrieved from http://www.tencent.com/en-us/content/ir/rp/2014/attachments/201402.pdf

Tencent 2015, Weixin de yinxiangli [WeChat impact report], Retrieved from http://blog.grata.co/wechat-impact-report/

Tencent 2016, Tencent WeChat software license and terms of service. Retrieved November 08, 2018, from https://weixin.qq.com/agreement?lang=zh_CN [in Chinese]

Wang, X & Gu, B 2016, ‘The communication design of WeChat: ideological as well as technical aspects of social media’, Communication Design Quarterly Review, vol. 4, no. 1, pp. 23-35

Wang, Y, Hahn, C & Sutrave, K 2016, ‘Mobile payment security, threats, and challenges’, Mobile and Secure Services Second International Conference, IEEE.

 

 

 

Website references:

No author and date, 8 Things You Should Know About The Lucky Red Envelope, Arts and Culture.

https://artsandculture.google.com/theme/PwKiICEFJXMOJg

Matthew, B 2015, How to Take WeChat Payments as a Small Business, China Channel.
https://chinachannel.co/take-wechat-payments-small-business/

No author (2018), Tencent’s WeChat hits 1 billion milestone as Lunar New Year boosts monthly active users, South China Morning Post.
https://www.scmp.com/tech/apps-gaming/article/2135690/tencents-wechat-hits-1-billion-milestone-lunar-new-year-boosts

Steven M 2015, WeChat valued at $83.6 billion, half of Tencent’s market cap: HSBC, Tech in Asia.

https://www.techinasia.com/talk/wechat-valued-at-83-6-billion-half-of-tencents-market-cap

Nicole J 2018, WeChat launches new shopping function that lets you shop on JD.com with just a few clicks, Technode.

WeChat launches new shopping function that lets you shop on JD.com with just a few clicks

Eva D 2015, China to Embed Internet Police in Tech Firms, Wall Street journal.

https://www.wsj.com/articles/china-to-embed-internet-police-in-tech-firms-1438755985

 

 

 

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