The Secret of WeChat's power- It's History

Internet memes where everyone acts like sheep drive me nuts. Especially when they are written in English about China and have no basis in reality. The foreign press gets all hot and heavy over some minute detail and, once again, misses the boat on something important in China. In the last week, this meme has been an article and various copycats predicting the demise of China’s WeChat app.

If you’re selling or marketing to Chinese clients, you’d do well to choose wisely what you input into your brain. Not only is WeChat the king of the Chinese internet and will only grow in power, there are good reasons for that. And they aren’t difficult to grasp even for newbies.

I will attempt to lay out the history of WeChat and its competitors so you can draw your own conclusions as to its place in history and usefulness to you as a real estate agent or person marketing to the Chinese. It’s a whirlwind and i really enjoyed writing this one and hope you enjoy reading it. So here goes.

A couple of years ago, Jack Ma’s aging PC based technology consisting of Taobao / Alibaba group was losing it’s grip on the market in China. Times had changed. Mobile had arrived. Alibaba missed mobile and was backed into a corner.

So Jack took his show to the US. It was a brilliant move as Westerners were just getting a wiff of the firestorm happening in China. The Americans, surprised to hear about China having an internet, were very excited. Much was written and is still circulating the bowl about “Alibaba’s technology” lol and Jack Ma’s genius.

So, like a slapstick comedy movie, the Americans were at the Oscars and a Chinese director was tipped to win. So when Jack Ma strolled on stage, the crowd erupted assuming he was the star. Actually Jack was looking for the bathroom and Pony Ma (of Tencent) missed his cue. But viewers back in China knew: The battle was over and WeChat won.

A Chinese site with massive traffic got everyone on Wall Street all hot and heavy and they saw dollar signs. They pushed the Alibaba IPO to the 3rd highest in history. Higher than Facebook or Google. Think about that for a moment. The Americans, largely unable to even read this website, suddenly deemed it the nearly the most valuable company in the world. They also conveniently ignored other nasty details like the fact that owning stock in Alibaba just gives you ownership in Jack Ma’s holding company registered in the Cayman Islands. They simply have “a claim on some of Alibaba’s profits” but no actual ownership stake.

I wrote about the risks extensively pre IPO but no one wanted to hear. Everyone was too excited about this amazing “internet company from China”. Anyway, why did Jack Ma go to the US to raise money? Because no one would have given it to him in China. I’m not saying it’s worthless or you are a fool for buying it I’m just telling you the facts. You draw the conclusions that make sense to you.

Now let’s go back in time and look at Alibaba / Taobao to see how this all played out. Don’t get me wrong. Alibaba Group is a force. And Alipay is no joke but, like a Chinese shadow puppet show, much is hidden from the viewer. I’ll go into depth on Alibaba in another article if you are interested.

So…Alibaba grew as China’s manufacturing grew. Simple as that. While pundits compared Alibaba to Ebay, they missed a few key points. One is that China was becoming the manufacturing capital of the world. And it’s power came not from it’s hidden duct tape technology that someone somehow deemed innovative or Jack Ma’s all seeing eyes but on something simpler and closer to home: its users and their needs.

Alibaba was a way for small, medium manufacturers to bypass middlemen and sell direct to buyers abroad

So those hordes of overweight traders who haunted bars like Frank’s Place in Beijing in the 90’s started to lose their way. Buyers were still necessary but their ability to mark up China exports started eroding the moment Alibaba was launched. Footnote, those old grisly, cynical China expert buyers were a rough bunch but they served a purpose: They could spot BS a mile away.

“The Echo Effect”

Alibaba opened a whole new field of totally naive buyers to the Chinese market. And most scams and horror stories came directly from this newly found access. To bring you back in time, in the 80’s and 90’s in China, every company had a young lady working as an export or marketing manager. She could speak English and she was clever. Anyone who negotiated with her was at risk. She had many tools. I think she, I’ll call her Echo, was the unsung hero of China’s export surge. Echo was awesome.

Unfortunately for Japan, they never had Echo. Not only was contacting Japanese companies to buy from them complicated and paperwork laden, they actively distrusted foreign companies at the time. (Even now to some degree) But back then it was onerous. They wanted guarantees, an office in Japan, a Japanese staff, licenses, multi-year agreements. To buy from China, you just had to chat up Echo on QQ.

Echo, at the chemical company 200 miles out of Qingdao, would do whatever it took to make the sale. She was wily. She was crafty. She could stall.  She could make you laugh.  She could misdirect your attention.  She was pretty (usually) and, if not, she had her charms. So it was Echo VS the Big Fat Trader. Guess who won?

Echo did and so did Alibaba. So Alibaba grew until it could grow no more. Every single manufacturing company of merit, every two bit manufacturer, every replica Gucci bag maker, and their brothers and cousins had a company on Alibaba. They all looked legit. They all had great reviews partly due to the fact that it was easy to bribe low level Alibaba staff back then.

Anyway, it got to the point where Alibaba had a absolute monopoly on the Chinese export market. Everything bought from China started at It was incredible really. One of my good buddies was an early employee and his stories of early Alibaba days will make you roll with laugher and cry real tears. It was human tragedy on a grand scale. Theft on an unimaginable scale, lives ruined, companies bankrupt, even murder and cross border chases. And money. Piles of money.

A footnote is that much of Alibaba’s early success was products that infringed (ie ripped off like no one’s business) on patents. So no one is Snow White here. Sellers sold, buyers bought. Empires sprung forth.

At times Jack made a show of weeding out fakes but things soon went back to normal. And to be fair to Jack, what else could he do? His site wasn’t creating these companies. It was simply facilitating their access to the outside world. Truth be told: They were a big part of China’s rise. Copies, fakes, IP ripoffs, these were a major part of China’s overall strategy to eventually develop homegrown tech. If you want to blame someone, blame the government who looked the other way and even encouraged it. (Illegal Hollywood copy DVD’s were openly produced by Chinese military manufacturers until downloading finally put the wooden spike in their heart. It was a major source of revenue for certain divisions of the PLA. But as with all things China, they change, quickly.

After conquering the worldwide manufacturers B2B market, Alibaba looked to cut out more middlemen. Think of Alibaba group as a little like Costco in this respect. They want to go direct to consumers. They did it in two steps. The Ali-Tao two step. Alibaba cut out many of the buyers who travelled to China and Taobao, Alibaba’s next iteration, went the last mile, straight to the consumer.

But there’s another twist. The consumer had changed. The consumer of choice was no longer the American consumer.  (Recall, Alibaba was for export to foreign markets) The consumer everyone wanted was the Chinese consumer.

Jack Ma made a very astute choice and bet on the Chinese consumer with Taobao

So Taobao is something like Ebay for the Chinese domestic market. Think less diesel engines for dams, chemical fertilizers, industrial pumps and more makeup, birthday party things, clothes, cool backpacks and electric bikes.

Meanwhile, back at the Shenzhen ranch, Tencent had QQ. QQ was a chat app. With a ripped off logo. And a clunky technology. But had zillions of users. And their competitor was a city slicker, MSN. Think MSN: Good schools, good family, 1st Tier City. QQ: all the rest

MSN had the preferred users in almost any marketers mind. They were young, upwardly mobile, had disposable income, worked in high value industries. But their numbers weren’t large… And they were more vulnerable than anyone predicted.

China is all about the numbers

So QQ got creamed in the big city. And, like Mao’s Army, they retreated to their Yanan: The countryside. And they built their base there and bided their time. And what a base it was! It now has 700 million users who are more active than any other app in the world. Including Facebook WhatsApp. By far.

So QQ took over in the countryside. And me and my friends were using MSN. And to be honest, most MSN users looked down on QQ people to some extent. Everyone had a QQ account, don’t get me wrong, but it was just for chatting with that one friend who lived in the boondocks or that cute girl out in Hebei..

More numbers

At that time in China, MSN usernames were like “flying kitten” “heart world” “happiness sunshine” and so on. But QQ’s userbase was less technically savvy than MSN so…. instead of using names for ID’s, QQ had numbers. So your QQ user ID could have been 888927, for example. This had the benefit of being able to tell your grandmother over the phone. “Grandma, type in 8…8…8 and so on”.  Although it looked like gibberish to foreigners, it served a useful purpose, it was easy to remember and communicate in Mandarin.

Chinese like numbers. Easier than asking “which character for Hu?”. And numbers conquered China too. Websites often have names like for email and on and on. Numbers are easy. Numbers are fast. And QQ was all about numbers. So the user base for QQ went ballistic. Despite the fact that they weren’t really “cool” and were still thought of as a “copycat” because of the ripped off logo. And to be fair, their software was less sophisticated at the time. And more scams and scandals came from QQ than anywhere too. So the outlook was looking cloudy for Tencent.

Please excuse this interruption for the short rise and rapid fall of Weibo (China’s Twitter) Weibo is like Twitter. Posts are public. Unfortunately for Weibo something exists called the Chinese Communist Party. And they control media and public discussion. Weibo’s very structure makes it impossible to grow past a certain point. If your post is forwarded a certain number of times in China and is deemed “harmful” or “provokes troubles” you are screwed.

As soon as Weibo rose, the CCP took it down. Like a ton of bricks. It still exists as a skeleton of it’s former self. Utterly gutted of discussion and life. Don’t get me wrong, I have a good following on Weibo and used to love it but mostly ignore it now. The juice is gone. The life all moved to private discussions. You guessed it. On WeChat.

When the shift to mobile happened, Tencent was desperate. Giving bonuses to all employees who could come up with something that would help them make the leap. When a team in Shenzhen created the WeChat app, Pony Ma (President of WeChat’s holding company Tencent) knew he had it right. And they rolled out like no ones business. Desperate to get the lead in mobile. He made it easy to join. Users could use their previous QQ ID and password without even signing up. They just logged in.

And times had once again changed in China and no one wanted to be a number . Consumers weren’t satisfied with second rate tech. They didn’t want a copy of Silicon Valley. They wanted something China. A private world they could communicate with their real friends: The term Guanxi mean anything to you? Similar but different from Facebook where you have so many people you don’t really know. WeChat is more tight knit. More real life friends. And you can openly share stuff. Like your new Lamborghini and trip to London. And no one else could see it so the Chinese government, paranoid of social dissent, would be more tolerant.

After WeChat appeared on the scene, there was a certain pride as this app was actually better than anything coming out of Silicon Valley. Truly a Chinese original. Sleek, easy to use, fast, very well made. Zero glitches. Anyone who doubts Chinese programmers ability should download WeChat and give it a try. It’s smooth as silk. And intuitive as the day is long. So Tencent had the right strategy for getting users to sign up and for government regulation. And they took a page out of Starbucks book in my opinion. They made them feel cool.

Did you read the Starbucks book, “Pour Your Heart Into It”? One of the key factors that led Starbucks to success was fascinating the shift from American drip coffee (think gas station or “church coffee”) to glorious Latte and Cappuccino. Howard Shultz observed clients who didn’t know Latte from a lathe and realized he needed to make it easier for consumers to know what to order. So he made the menu dead simple. With Latte and Cappuccino on top of the menu.

So Farmer John strolls in, looks that the menu and instead of saying “I’ll just have a coffee! dammit’ as he was wont to do, he said, “I’ll have a Latte”. Of course he probably said lat as in I gotta work on my lats but the staff understood. And farmer John was might proud to be drinking a latte. So he came back. And this time he tried the cappuccino. And he was glad he did: Cause it tasted good. It made him feel good. And he told his friends. And one of the great business success stories was born.

QQ did the same thing. You sign in with your previous user ID but you don’t need to think of a username like “zippity dragon” and you don’t need to use your now uncool number but you can use your real name. And that was cool.

WeChat was cool and the timing couldn’t have been better, Chinese were ditching their Nokia dumb phones for smartphones and, overnight, the slaughter of MSN occurred. You gotta move fast in China. Even a hard won lead can evaporate overnight. There is no loyalty and now MSN is just a memory. If you ask your Chinese friends for their most memorable MSN experiences get ready for an onslaught of laughter and nostalgia.Good times they were. And they still are but now good times on WeChat.

WeChat is free. Easy to use. All your potential clients are on it. That I will repeat: Every single current or potential Chinese client for your product, service or real estate listing is on WeChat. WeChat goes right to the heart of the Chinese consumer revolution. Don’t be distracted by flashy ads. The Chinese market isn’t for the faint of heart. Chinese are discerning. And you need to up your overall game and your WeChat game. So give it a try. Add me if you like. My ID is: paulsalo

My next post (WeChat’s Secret Power Part II) will be on the real power behind WeChat…and it’s not the technology. And no one is talking about it… stay tuned and appreciate your comments and likes below.

If you are interested to learn how to build your business catering to Chinese real estate investors, check out our FREE mini course 

Paul Salo is the creator of the #1 real estate training coursefor reaching Chinese property investors. Paul speaks fluent Mandarin and Japanese and has been featured in China Business Network, ITV Asia and “HGTV: Shanghai, Living Abroad: American expats living the high life in Shanghai”

Contact with Paul on Facebook, Twitter and WeChat: ID paulsalo


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