On Growing: 7 Lessons from the Story of WeChat

By: Anu Hariharan | UpdateTime: 04/17/2017

This article originally appeared on Y Combinator's blog with joint efforts from China Tech Insights (Twitter: @CNTechInsights)

By Anu Hariharan 

Founders are increasingly pointing to Asia when asked for an example of a product they aspire to create, and WeChat is very often that aspirational product. My friend and former colleague Connie Chan described WeChat as “the one app to rule them all”. It dominates the Chinese mobile market with 889 million monthly active users1. The WeChat platform has completely evolved the way Chinese people communicate and socialize online, and it has also changed the way they pay each other and pay for their groceries. WeChat is no longer just an app. And while WeChat’s blazing success has been concentrated in China, everyone in the Western world has experienced WeChat’s work, as the service has inspired a new category of “messaging as a platform.” You don’t have to look hard to see hints of WeChat in other messaging platforms such as Apple’s iMessage or Facebook’s Messenger platform.

YCombinator partnered up with China Tech Insights, a research group within Tencent (WeChat’s parent company) to understand how WeChat drives its 889 Million monthly active users to use the app an average of 50+ minutes, and 9 to 11 separate times, per day2. To put that in context, it is the same as the “combined time” users spend across a portfolio of Facebook apps, including Instagram, Facebook and Facebook messenger, on a daily basis3.

This post dives into the growth strategy that led to key WeChat milestones, lessons learned and gives insight into the method behind the madness as WeChat scaled from 0 to 800M+ MAUs in less than 6 years. Unlike AOL and Yahoo, Tencent is one of the few companies to have evolved its messaging product portfolio successfully from a web/desktop product to a mobile/messaging platform.

 

Lesson 1: Build Your Own Competition

Tencent Started WeChat (mobile-first messenger) as a side project, and it ended up reinventing messaging in China.

Tencent was already one of China’s top internet companies in 2010, and the biggest social company even before WeChat was launched. Many Chinese people grew up using Tencent’s QQ, a popular desktop messaging app (similar to ICQ and AOL Instant Messenger). At the time, Tencent’s products had ~650M4 monthly active Instant Messenger accounts. Recognizing the growing importance of mobile, the company created a mobile version of QQ in 2008, but the app was weighted down by desktop-centric features (e.g., multiple user statuses, large file transfers, embedded services such as music streaming, etc.) back then.

 Tencent made a bold decision: it put together a small skunkworks team from the QQ Mail team, its core product at the time, to a new mobile app that could potentially compete with other product teams from other divisions within Tencent. This team of only seven engineers went on to create the first version of WeChat in just three months. WeChat launched in January of 2011 as a simple messaging and photo sharing app. This lean and relentlessly focused team very quickly launched what would become the most transformational mobile service in China.

 WeChat was not the first mobile messaging app when it launched. Xiaomi’s MiTalk was the leader at the time with 5M registered users. Due to the intense competition, WeChat did not see much growth right after its initial launch. WeChat realized they had to offer more than just chat to enable users to switch from other mobile chat solutions to WeChat. In May 2011, 3 months after launch, WeChat turned on voice messaging, allowing people to send short audio notes (similar to the native iPhone iMessage feature that came out 3.5 years later). The inspiration to add voice messaging came from TalkBox and Kakao Talk. Using voice messaging was strategic because the native mobile keyboard to type Chinese characters at the time was not easy to use and consumers found sending voice notes intuitive, personal and convenient for daily life. As one of the first messengers to offer voice, text and photos in a combined solution, it enabled WeChat daily downloads to spike to 50k-60k consistently.

Today Mobile QQ continues to cater to a younger user base and has 652M MAUs5 as of December 2016. Tencent proactively worked to differentiate the user experience between the two platforms, with QQ offering more features for entertainment (e.g., animated video stickers, facial beautifying tools). Conversely, WeChat remains focused on offering useful services that its users access in daily life (e.g., Content subscription and paying utility bills).

 This lesson is reminiscent of Amazon’s move to cannibalize its own book sales with an e-reader / e-books (foreseeing the trend toward digital content) and Uber’s move from town cars to UberX. If you don’t create a culture of disrupting yourself, then a competitor is likely to disrupt you.

 

Lesson 2: Design For Groups (“Group Effect”)

An individual user’s behavior can be quite distinct from how they behave when in a group. To identify these group-effect opportunities, WeChat closely observed how users behaved among groups of friends and strangers in everyday life. WeChat did not lean on more traditional forms of user research, such as surveys, interviews or following competition.

 Allen Zhang (Founder of WeChat) has been adamant about developing the product around “Group Effect” (i.e., an individual user’s behavior alone can be quite distinct from how they behave when in a group). So, the WeChat team pays attention to how a feature may be adopted by a group of users vs. an individual user. This in turn also increases the rate of adoption – as more users adopt these features, other users also hop on the bandwagon.

 WeChat, like most social networks, realized early on that they needed to solve for the issue of having zero friends on day one. Simultaneously, in the U.S., Facebook was famously relentless about getting users to their first 10 friends within 14 days, which their data showed was the key to long-term retention. WeChat found success with a slightly different approach to keep people engaged via a feature called “People Nearby”, which was a simulation of the real world. People could see other “People Nearby” users (who were not yet on their contact list) nearby through the app6. The location-enabled feature satisfied users’ curiosity about knowing what’s going on around them and at the same time, boosted their sense of community on the platform. It also helped boost the pace of user acquisition to over 100k+ per day7.

After launching People Nearby, WeChat also rolled out account linking between WeChat and QQ, enabling users to import their existing social graph on QQ to WeChat. Importantly, the team only exposed the importing feature to those who were already using both products, so that users were able to use both services for their differentiated purposes. This move rose the tide on messaging users overall, pushing the number of registered users on the platform up to 50M by November 2011, allowing WeChat to overtake Xiaomi’s MiTalk as the leading messaging app in China.

 Shake which utilized both the GPS and accelerometer had people shaking their phones to find a random person to chat with. The feature served two purposes: a) give people a way to engage when they’re new to the product, and b) it had the side benefit of creating a take-notice element to WeChat in the offline world, very much like people on Pokemon Go. Launched in October of 2011, Shake was used over 100M times8 in the first month of launch. This feature was critical to scale initially, and used as a creative growth strategy, but it is not popular today since most people in China are already connected to their friends and coworkers in WeChat. “Message in a Bottle” allowed users to exchange random messages by throwing a virtual bottle in the sea and when a user picked it up, they were connected.

In November 2011, after launching all these important new features that facilitated group interactions, the new user acquisition of WeChat hit a new record of 200k in a day9.

 

Lesson 3: Extend Features from Users’ Inner Desires

WeChat paid attention to the motivation behind communication nuances and cultural behaviors to give users more than they could ever think to ask for in a usability study. Allen Zhang was passionate about keying into the inner desires behind an exhibited behavior, which often led to features that fit naturally into users’ worlds.

During WeChat’s second year, it launched Moments (the Chinese translation means “friend circles”), a photo-sharing feature to visually share your story with a private group of friends. Unlike the Facebook News Feed, comments and likes on a particular post can only be seen by “mutual friends” and not by “friend of friends.” This was deliberate and inspired by Path, a U.S.-based photo sharing and messaging app that launched in 2010 and limited a user’s social network to a certain number of close friends and connections with strong ties. Instead of exactly replicating what Path did, WeChat understood that the true motivation behind this use case and drew a parallel with an old Chinese philosophy called “circle cultures,” meaning smaller circles are much stronger at the core and as the circles get bigger, the ties get weaker.

A team of only 10 people spent 4 months making over 30 versions of WeChat Moments before deciding on a version to launch. This showcases the efficiency with which the product iteration took place. WeChat always kept their product development team lean since this brought a relentless focus on the features they were working on. Though there are a few new features, the core product functions are not very different from the version originally launched.

Since the early days, many WeChat users shared content from external blogs and news sites via chat and Moments. The WeChat team was eager to bring that content in house and let creators connect natively with their audience. Its solution was WeChat Official Accounts (OA). Released in 2012, OAs seamlessly allowed a “one-way follow” similar to Twitter (and competing with Weibo) for fans to effectively “subscribe” to content from their favorite celebrities. However, unlike Twitter or Weibo, celebrities could send text, voice and video updates to their fans that looked like regular WeChat messages and created a feeling of a personal and private conversation. This resulted in many celebrities setting up their WeChat OAs even though they had millions of followers on Weibo.

The success of celebrity OAs prompted WeChat to expand the feature to accounts for brands and businesses. This has allowed publishers to directly broadcast valuable content on a regular basis to their fans although the frequency is limited. OAs also enable users to communicate with service providers (e.g., housekeeping) to do everything from booking a service, to customer care, feedback and Q&A. Where Twitter/Weibo were tools for businesses to broadcast and brand, WeChat (via OAs) became a channel for direct communication with customers.

Sticker Store was a way for users to express themselves when communicating with each other (similar to what Apple rolled out on iMessage many years later). However, WeChat was the first to create a marketplace for illustrators who can earn tip money via “rewards” from WeChat users who like their stickers. Users could choose to reward any amount up to RMB 200 ($25 USD). The marketplace enabled healthy competition among illustrators to compete for the top spot (and enriched the quality of the WeChat user experience along the way).

 

Lesson 4: Big Ideas Come From Solving Your Own Problems

Y Combinator has long advised founders to be an avid user of the product and solve their own problems. While WeChat was sitting comfortably at the 300M MAU mark, a simple feature to help their own management team give out Red Packets after Chinese New Year would help them nearly double.

WeChat Red Packets originates from one of Tencent’s company custom and broader Cantonese tradition that every manager in the company gives each employee a red envelope with a small cash gift on the first work day after the Chinese New Year holiday. As the company expanded, it became exhausting for some managers to give out so many Red Packets so they asked for technical solution to solve the issue – they had no idea that the result would become the prototype of WeChat Red Packet.

The first version of WeChat Red Packets was developed by a team of 20 in 3 weeks. It was tested internally on WeChat OA users and was immediately well-received. Instead of releasing multiple versions of a product, WeChat team is an avid user of its own products. Often they use the product in the middle of the night as a “single user” to pay attention to details and identify bugs early on. They also observe how friends and family use the product before it is released. From New Year’s Eve in 2014 through 4pm on the day after, over 5M users used WeChat Red Packets.

WeChat Red Packets today has several different versions, including one with a random cash amount and one with a fixed cash amount – with the random packets, each recipient gets a random fraction of the total amount initially sent by the sender (no more than RMB 200, USD 29 each to avoid bribery). This makes receiving a Red Packet in the presence of a group of people like a lottery combined with a fortune cookie – you have no idea how much money you will receive before you open the packet, and getting more than others can be a sign of good luck. This good luck implication also makes it a perfect game among close acquaintances at a party. This is another example of the “Group Effect” in practice. Since Red Packets are sent within group chats, the rate of adoption increased as more users received it.

The substantial growth was observed in 2015 with over 1B Red Packets sent during the Chinese New Year holiday. The growth of WeChat Pay was initially driven by close tight knit social circles – friends and family sending money to each other and they were willing to connect their bank accounts to do the same. This important move was necessary to build trust among users and to inculcate the user behavior to drive mobile payments before extending this feature to more shallow circles like paying merchants, online and offline stores. The payment network was boosted even further by a partnership with Didi (China’s version of Uber) to facilitate in-app payment for WeChat customers’ Didi rides. This partnership opened up a broader universe of payment partners who now work with WeChat enable in-app payments for everything from cell phone bills to utility fees.

In only two years, WeChat Pay has become the most significant player in the Chinese payments landscape, is used for a multitude of actions – used for everything from Red Packets to offline payments. As of 2016, Tencent has 600M mobile payment MAUs and over 600M average daily payment transactions.

 

Lesson 5: Monetize Subtly

Monetization and User Growth are not mutually exclusive. WeChat has always been ready for monetization and even uses it as a lever to improve the overall product experience.

Game Center bridged WeChat with the core expertise of the broader Tencent team to allow people to play games within the messaging platform. While similar on the surface to other game stores like Line and Kakao, WeChat took the element of social gaming to a new level – where people flooded to play games en masse. This subtle feature change benefitted both game creators and WeChat. A Tencent game called Rhythm Master, for example, had 700k DAUs a year after release, but exploded to 17M DAUs (>20x growth) after launching it in Game Center.

Launched in January of 2015, WeChat Moment’s native ads were an important part of WeChat’s business model. While this was not a key driver of growth, it did not limit the growth trajectory of WeChat either. To minimize the impact on user experience, WeChat limited the number of native ads shown in a user’s WeChat Moments feed to one per day (compared with Facebook’s limit of one ad every ~10 posts in News Feed).

An example of Airbnb’s native ad in WeChat Moments feed

 

 

 If a user double clicks on the Airbnb ad they will see 3 or 4 photos with text sharing the story, which is very similar to what WeChat moments offers with friends.

Users interact with and share ads similar to how they share posts from their friends, which is uncommon on other social networks. For example, if you tap on the ad, you can see that the Airbnb ad is similar to a visual story and feels native in “Moments.” The “likes and comments” can only be seen by mutual friends and not by “friends of friends.” Despite restricting both ad load and limiting the conversation to only mutual friends, the above Airbnb ad, received more than 1.8M views after it was shared, saw a 5x increase in click through rate, and drove a 600% increase in new sign-ups after it was shared by users.

WeChat even adapted the classic coupon model to a friend-based endorsement model for products and services. When a user redeems a coupon offered by a vendor during an offline purchase, the user can opt-in to share the offer with their friends resulting in all of the user’s friends being able to view and use the same offer. Vendors can also reward a user who redeemed a coupon by giving the user another coupon for use and sharing, thereby extending the exposure of their products and services. Thus WeChat established a coupon credit system for vendors to purchase credits from WeChat for promoting their services through this coupon sharing model.

 

Lesson 6: Measure What You Value, Not What You’re Supposed to

WeChat defies the popular belief that growth is all about user growth. Instead they think about growth as increasing value (e.g., the number of tasks WeChat can do in the daily lives of users).

Unlike other social products, WeChat does not only measure growth by number of users or messages sent. Instead they also focus on measuring how deeply is the product engaged in every aspect of daily life (e.g., the number of tasks WeChat can help with in a day). While WeChat does have KPIs, these are typically shared only among department heads. The drumbeat-message engineers receive every day is “are you creating more value for the user?” In support of this goal to be a tool through which people accomplish their daily tasks, WeChat puts limits on how many friends you have, how many promotional messages you can see, how much engagement they display from your social circles — ultimately they see this as noise that may distract from the utility of WeChat.

WeChat’s elevation of the QR code as a link from the offline became the lynchpin for China’s online-to-offline boom in 2015. Previously, to engage with a service or brand, a user would have to search or enter a website address. WeChat’s Pony Ma says of QR codes, “it is a label of abundant online information attached to the offline world”. This logic explains why WeChat chose to promote QR codes in the first place. QR codes never took off in the U.S. for three key reasons: (1) the #1 phone and the #1 social app didn’t allow you to scan QR codes. (2) Because of this, people had to download dedicated scanner apps, and then the QR code would take them to a mobile website, which is arguably more cumbersome than simply typing in the URL or searching for the brand on social media. (3) Early use cases focused on low-value, marketing related content and at times was merely spam. So, even though QR codes would’ve been U.S. marketers’ dream, it was a few steps too far to be useful.

With the established adoption of QR codes, WeChat launched “Mini Programs” as an extension of WeChat Official Accounts designed to enable users to access services in a more frictionless way just like the web browser did (there was no need to download a program to access a service in the PC era). Similarly Mini Programs is the tool that allows users to open those “apps” and take an action online (like placing an order or paying for merchandise) without requiring to download or install the app. Think of a local restaurant or a local store in your city – they now don’t need to design their own apps. Instead they can be part of WeChat Mini Programs. They are deliberately meant to be discovered via social connections or the offline world by scanning a QR code. WeChat claims this user-friendly flow drives higher purchasing conversion rates (though it is still early). Many of these use cases are low velocity use cases compared to day-to-day messaging.

 

Lesson 7: Don’t Play Favorites With Features

One of WeChat’s core product tenets is it is a “tool” holding up utility-oriented qualities (highly functional, quick and easy to use) as vital to the product experience.

Most product managers are focused on building “sticky” features and driving retention metrics. However, Zhang actively worries about users spending too much time in any one feature since this could prevent users from doing other valuable things (such as paying bills….which you can do on WeChat). In fact WeChat believes that a good product will encourage user efficiency – i.e., enable users to complete the task quickly in the most efficient way and exit. Zhang compares this to Google – once the user finds the right link, Google sends the user directly to the desired site. While it is heartening to see users browsing the content on Moments, the team gets worried if they see too much time being spent on marketing content on Moments at any point in time because low quality content can distract users and reduce value long term. As a result, WeChat limits the amount of marketing content on Moments. Similarly, WeChat restricts the number of broadcast messages that can be sent from Subscription Accounts by brands and businesses to one per day. In fact these broadcast messages don’t even generate a push notification since it would impact the user experience.

Despite the deep and diverse set of features and services available in WeChat, the product team has maintained a very simple UI. The app has only 4 tabs: chat, contacts, discover, and me. They’ve been very disciplined in keeping the app to only 4 tabs, as whenever they experiment with adding one, the left-most tab sees conversion rates drop by 20-30%.

To summarize, the WeChat team found ways to be scrappy, compete with their own products, built features that answered cultural needs and emphasized group interactions and most of all they have relentlessly focused on creating a simple tool that could extend into the hands of every mobile consumer. At this point, WeChat is not only an app — it is simply the internet. Which makes it easy to see why WeChat is becoming an inspiration to many hopeful startups.

Thanks to Rhea Liu and the rest of the Tencent team for partnering with us to share first hand the learnings from WeChat. Thanks also to Connie Chan, Jonathan Hsu, Yanyun Xiao, Ben Rubin, Ram Parameswaran, Sonal Chokshi, Sam Altman, Ali Rowghani, Brad Lightcap, Sharon Pope, Craig Cannon, Simon Lu, and Nic Dardenne for reading multiple drafts of this essay.

 


 

Notes

1. Source: MAU accounts based on Tencent data as of 2016.

2. Source: iResearch, Jiguang.

3. Source: Facebook Q1 2016 Earnings Call.

4. Source: Tencent Annual Report 2010.

5. Source: Tencent Annual Results for 2016; Smart Device MAU of QQ.

6. Note: Users not using “People Nearby” would not appear.

7. Source: The Story Of Tencent by Xiaobo Wu.

8. Source: The Story Of Tencent by Xiaobo Wu.

9. Source: The Story Of Tencent by Xiaobo Wu.

Photo credit: tech.qq.com

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