WeChat serves as China’s operating system. Tencent’s creation has revolutionized how people communicate and do business by providing a single platform for texting, social networking, and mobile payment. The WeChat ecosystem is an extraordinary way to make money from over a billion user base. 

WeChat has expanded into a fully digital ecosystem, providing millions of users with a one-stop shop for all their digital needs. In this article, you will find a comprehensive overview of WeChat’s business model, including an explanation of its primary revenue streams, the features that keep its users coming back for more, the obstacles it has had to overcome, and the reasons for its rise to the top of the global tech industry.

What is WeChat?

WeChat or Weixi, the Mandarine for “micro-message,” is a multi-functional, all-in-one superb app developed by  Tencent, the world-leading Chinese internet and technology company. The app was launched in 2011 as a simple messenger app, a Chinese version of WhatsApp. 

However, the app was developed to be a potent multi-functional social app in a country where many foreign-owned platforms like Facebook, YouTube, and WhatsApp are banned, filling the gap in the world’s largest social network market. Today, it has more than 1.3 billion monthly active users due to the app’s various features, providing a comprehensive solution that offers seamless integration of services and a user-friendly interface.

WeChat’s Business Model 

WeChat’s Business model is the “Fremium Business Model,” which has been the key aspect of WeChat’s business strategy. It allows the app to offer a wide range of basic services for free, like messaging, voice calls, and video calls. However, WeChat monetizes other features like payment, business accounts, and advertisements. Therefore, WeChat’s advanced hybrid business model offers the ultimate experience for its users. Here are the most distinguished features of WeChat:

Messaging and Communication

Messaging and communication is the basic feature of WeChat. The app supports 1:1 and group conversations and allows sending broadcast messages where users can send one message to multiple users or groups. 

Additionally, it offers high-quality voice and video calls, allowing users to connect face-to-face, maintaining personal connections regardless of geographical distance. Users can add contacts by scanning a QR or using The contact’s ID or phone number. This powerful omnichannel communication allows users to use the app for different purposes, such as:

• Wok communication, similar to Slack
• Neighborhood management, similar to Nextdoor
• Meeting scheduling, similar to Calendly and Zoom
• Hobby groups, similar to mailing lists

Moments – WeChat’s social feed

Moments is the primary WeChat social networking feature similar to a Facebook timeline or a Twitter feed. This feature allows users to share updates and stories with their friends. They can share text posts, website links, photo albums(up to nine photos), and short videos. Also, it provides a privacy feature that allows users to decide who sees their moments by dividing their friends into separate groups. 

Friends can interact with the moments through liking, commenting, and sharing posts, which fosters interactive and engaging social interactions. However, users can allow nonfriends to see the moment by converting the account into a public account.

WeChat Pay – Mobile payment platform

Users can pay for goods online or offline using WeChat Pay, which has become one of China’s most popular payment methods since its release in 2016. They can link their Chinese bank account to the digital wallet and scan a barcode to pay for goods. 

The WeChat Pay explosion made it a primary payment method for all stores, from megastores to mom-and-pop street vendors. Also, users can send money to other users via text, streamlining the money transfer throughout China. The app also allows international money transfers; they pay in CNY, and the transfer will be deposited in a foreign currency abroad.

Mini-programs

Mini programs are a special feature that WeChat provides for businesses. These apps don’t need to be downloaded or installed and work directly within the WeChat ecosystem offering the users a one-stop-shop for everything. Mini Programs offer diverse services and functionalities, allowing businesses, developers, and organizations to engage with users directly within the WeChat ecosystem. Third parties can develop their mini-apps, a “light” version of their original app, and add them to the WeChat framework. 

Games and top-up

Games are the most popular type of min programs. WeChat users can enjoy various in-app games ranging from casual puzzles to multiplayer challenges, fostering a lively gaming community. Also, users can elevate their gaming experience by purchasing virtual features such as goods and power-ups. Additionally, WeChat allows users to top up their mobile phones directly within the app to stay entertained, socially connected, and maintain their mobile connectivity needs in one place.

WeChat official accounts

WeChat Official Accounts or “OA” are the equivalent of Facebook public pages, where personal accounts offer connecting with friends. They allow businesses to inteact directly with their clients and enable them to establish a mini site with their own identity and publish content within WeChat. Official accounts help businesses to communicate directly with the targeted audience, increase brand awareness, build brand identity and loyalty, convert customers, and use WeChat ads. Some of the administrative features of official accounts:

• Broadcast messages
• Send direct messages
• Setup auto-reply
• Create a customized homepage menu
• Provide customer service
• Access analytics
• Manage followers

Official accounts have three main types: Service and Subscription Accounts used for audience targeting, while the third type, Enterprise Accounts used for managing and communicating with staff internally.

Red packets – digital gifting on special occasions

China is a country with rich culture, and one of the traditions is the “Red Packet” or “Red Envelope,” a special card used as a gift during the Chinese New Year on special occasions. WeChat launched virtual red packets in 2014, which has gained huge popularity ever since. 

Users can send virtual red envelopes containing money to their friends, family members, or colleagues as a gift or good luck gesture. Users simply determine the amount of money they want to send and then send it individually or distribute it among a group of friends. The main thrilling feature is the red envelopes’ randomness, as each recipient will receive a different amount of money, offering exciting and interactive experiences.

WeChat’s Revenue Streams

WeChat has adopted the “Freemium” business model as its key business strategy to attract and retain users and gather valuable data. It also developed many revenue streams, such as value-added services and advertising. The main revenue streams are as follows:

Business Accounts Subscriptions

While personal accounts are free, WeChat charges fees for businesses, brands, and influencers who want to verify their accounts and access premium services and subscriptions. These services were designed to improve the presence in WeChat and personalize interaction with the targeted audience. These features include:

Subscription Accounts

Businesses can get subscription accounts with custom menus and additional tools to showcase their product and service and effectively target their clients.

Push Notifications

Sending bulk notifications to the account followers to drive them through the sales funnel and increase engagement.

Targeted Advertising

One of the main advantages of having a premium account is running targeted ads that can benefit from the WeChat database.

Advertising and Sponsored Content

Like any other social platform, WeChat has successfully integrated advertising and sponsored content into its platform. Ads have three types: banner ads, moment ads, and mini-programs ads, and each type has a different fee. Also, WeChat has added a new feature allowing public accounts with very high traffic (above 100,000 followers) to get a part of the ad’s fees in exchange for displaying the ads on their accounts.

WeChat Pay and Financial Services

By providing a suitable ecosystem to group the users, boost their interactions, and offer the products they need, the last piece of the puzzle is providing an easy way to pay for goods, which WeChat has excelled in. It launched its own digital wallet and payment app,” Wepay,” which allows users to link their Chinese bank account to the digital wallet and pay for the purchases. WeChat charges 0.1% of the total transferred funds.

Additionally, WeChat has gone beyond by offering additional financial services such as wealth management products, money transfers, credit services, and financing and insurance, which also has its own fees.

E-commerce and Commission Fees

WeChat is a leading one-stop shop for users, providing them a seamless shopping experience without leaving the app. Such powerful features provide additional revenue streams since users and merchants have to pay fees. As WeChat provides a competitive and attractive e-commerce space for vendors, it must also pay” Merchant Fees,” which is 0.6% of the product price.

Gaming and In-App Purchases

When it comes to mobile gaming, China is the leader in the field, with more than 682 million mobile gamers. Therefore, in-app games are a significant part of WeChat, especially since Tencent, the giant gaming company, powers it. 

WeChat exploits the Chinese passion for games by providing a variety of games that one uses or teams can play, adding more interaction to its social platform. While these games are free and there is no need for installation or setup, WeChat offers advanced paid features such as virtual goods, more lives, and special customization, which users can purchase.

Factors contributing to WeChat’s success 

WeChat’s dominating position in the Chinses market can be attributed to a combination of factors, including:

Strong user base and network effects

Before WeChat, another prominent app, “QQ,” was developed by the same company Tenscent. QQ dominated the Chinese social space with hundreds of millions of users. Tencent took advantage of this huge user base to boost the WeChat lunch by allowing all QQ users to sign up in WeChat using their QQ account; a similar boost happened with META’s latest launch of “Threads.” This easy process allows for growing the user base into millions relatively quickly.

The Great Wall of China

China’s great wall was built to keep invaders out; also, there is a great wall keeping all social platforms such as Facebook, Google, Twitter, and YouTube out of China. This situation gives WeChat the leverage of no competition, being the country’s only choice for more than 1,4 billion users.

Freemium business model

The primary business model is freemium for individuals and businesses, which also helps attract more users. This business model helps collect valuable user data, such as demographics, purchasing habits, and interests. It can be useful for both WeChat to develop a wide detailed customer database and for businesses to improve their growth.

Free of ads

No one likes popups and banners everywhere, so WeChat simplified the advertisement process by offering an official account and limiting the daily promotional messages for public accounts. Additionally, users search for businesses instead of the annoying popup suggestions from the app itself.

Challenges Facing WeChat When Expanding Outside China

Network effects 

The absence of competition within China is a superb advantage. However, outside China, it is a big disadvantage. For the markets outside China, WeChat is a late app with a poor user database as most users already use other apps such as Facebook and Twitter. And even with small markets in small countries, the local app will win as local companies develop them for local needs. This is a huge obstacle limiting the expansion of WeChat.

All-in-one features

The all-in-one feature will work for users in China, where they can buy goods, take a taxi, or even issue a visa using WeChat. But, when expanding abroad, these functions will be limited as the local service providers will not be available. As a result, another competitive advantage is lost for the competitors.

Culture differences

Cultural differences between Asia and the US & Europe created a longer psychic distance for WeChat, hindering its success in foreign markets. While it gained market share in Asian countries influenced by Chinese culture, its social system based on acquaintances networking didn’t resonate with Western users who prefer platforms like Instagram and WhatsApp. WeChat’s failure to adapt and localize its product for these markets contributed to its lack of success in Europe and America.

Regulatory and privacy concerns

As a popular communication and digital services platform, WeChat should be subject to many rules and regulations and verification from authorities in China and overseas. Compliance with data protection, user privacy, and cybersecurity legislation is critical for keeping user confidence and avoiding legal concerns. However, WeChat’s close affiliation with Tencent generates considerable concern due to geopolitical sensitivities and national security concerns.

Conclusion

WeChat’s exceptional business model reflects its groundbreaking achievement in the digital space. WeChat has provided an all-in-one solution for its millions of users by integrating messaging, social networking, mobile payments, gaming, and online shopping. Its massive expansion and financial security can be attributed to the variety of ways it earns money, such as through advertising, WeChat Pay transaction fees, e-commerce commissions, and premium services. 

WeChat has maintained its leading position by constantly innovating and taking a user-centric strategy. Its business model is an excellent illustration of how a comprehensive digital platform might radically alter the course of human interaction and trade in the future.