Tencent on the hunt for online revenue with WeChat

A user logs on to the WeChat service on a smartphone in Boao, Hainan province. Tencent Holdings Ltd has started to provide online payment services through the social networking and messaging service. (Xinhua photo)

Tencent Holdings Ltd, China's largest listed Internet company, has enabled online transactions for selected merchants by linking a payment service to its popular WeChat smartphone application.

The move rewrites the rules of retailing and advertising on the mobile front. It is also part of a consistent company strategy to commercialize WeChat, which has more than 300 million users worldwide.

The app lets users send voice messages, photos and other media the way they might send text messages, without charging extra fees.

Since early June, WeChat has empowered a selected few of its registered corporate accounts to make online shopping viable.

WeChat does all back-end technical integration and support for these vendors, including page design and payment linkups, said Liu Sishan, a Tencent public relations officer.

Online transactions are made available via credit cards, online banking or TenPay, the company's third-party payment platform, she added.

TenPay, like domestic rival Alibaba Group Holding Ltd's AliPay and eBay Inc's PayPal in the US, allows merchants to process payments from customers' personal accounts.

For instance, fast-food chain McDonald's Corp is among the first batch of merchants to open an online channel via WeChat. Followers of McDonald's public account may pay three yuan ($0.49) for an afternoon tea discount coupon, and transactions are completed under the WeChat framework.

Liu did not reveal how Tencent charges the vendors.

Speaking on the sidelines of this year's session of the National People's Congress, company head Pony Ma said Tencent would begin introducing mobile social games on WeChat and introduce micro-payments for services like taxis, among other measures to make money off the application.

Tencent has long harbored an interest in the e-commerce arena, but is looking at ways to monetize its user base without charging for the app. For instance, it encourages WeChat users to scan codes at stores to purchase products and enjoy discounts.

Analysts said such a practice is likely to herald a wave of advertising on WeChat from retailers, spelling a decent return for the company.

"The mobile phone payment service on WeChat marks one key step on Tencent's path to develop e-commerce. And it provides momentum for the change taking place within the whole industry - future payments will take place on mobile devices," said Yi Fanghan, an independent Internet industry blogger.

Dong Xu, an analyst at IT consultancy Analysys International, said partnering with TenPay will create more possibilities for cooperation "where merchants can hunt for business opportunities themselves".

The Internet giant's commercialization drive has raised expectations for social media to translate their growing user numbers into profits.

While the majority of Internet companies are not averse to monetization, prior attempts have largely proved to be lukewarm, Dong noted.

For instance, Sina Corp, which owns micro-blogging service Weibo, has recently launched an online payment service in a bid to transform its heavy Web traffic into revenue amid increasing competition.

"But Weibo is faced with a setback as the micro-blog service adopts rampant intrusive advertisements and wears out users' patience. This is the one pitfall WeChat should skirt," Dong said.

Tencent has repeatedly sent signals that it would avoid bombarding WeChat users with advertisements. For example, it shut down two public accounts for their virus-like spreading of advertisements.

Wu Xiaoguang, chief executive officer of Tencent E-commerce Holding Co, has pointed out the shrinking ranks of Tencent's PC users. "That's why we are looking for ways to attract more people to WeChat service and mobile QQ," he said.

Tong Yang, marketing director of allgood.com, a Shanghai-based marketing firm, said: "Tencent has made 40 billion yuan from QQ users on PCs and mobile phones, and now these people are driven to WeChat. It will definitely become a main part of Tencent's future."

But Tong predicts the company's monetization plan will face new challenges, notably the possibility that the country's three mobile operators will charge for its use.