HONG KONG – Facebook’s stunning US$19 billion (S$24 billion) deal for messaging service WhatsApp places the social network in an arena where competition is fierce, particularly in Asia, where fast-growing chat rivals dominate their home markets.
The multi-billion dollar valuation of WhatsApp is based on expectations that its 450 million monthly users will eventually pass one billion, powering the social network’s drive into the fast- growing mobile space – particularly in emerging markets, where the simplicity of the messaging app can thrive on less expensive phones.
But it is not the only service gaining traction around the world, particularly in parts of Asia, where players such as WeChat in China, Kakao Talk in South Korea and Line in Japan dominate – and, according to analysts, show greater potential for making money given their different products and strategies.
While WhatsApp, which is free to download but charges users US$1 per year, is popular in some Asian markets such as Hong Kong and Singapore, services such as Line, WeChat and Kakao have also expanded around the region and beyond.
“Mobile-messaging apps are growing fast in Asia,” noted Elinor Leung and Seung-Joo Ro in a report for regional brokerage CLSA.
“While Facebook dominates the US, mobile-messaging apps such as WhatsApp, Line and WeChat have rapidly taken over Asian SNS (social networking service) markets, especially in the emerging markets.”
WhatsApp currently has a larger base than each of the three Asian services but they are growing fast, particularly when it comes to emerging markets, where smartphones or less expensive “feature” phones are seeing explosive growth.
CLSA noted that “Asian mobile-messaging apps like Tencent’s WeChat and Naver Corp.’s Line should be valued at a premium to WhatsApp with their wider service offerings and higher revenue potential from games to e-commerce and payment.”
WeChat is currently valued by CLSA at US$35 billion and Line at US$14 billion.
Global social messaging volumes are expected to reach 69 trillion and subscribers to such services 1.8 billion by the end of 2014, according to data from market research firm Ovum.
“In SouthEast Asia there is a huge tussle for market share,” Neha Dharia of Ovum told AFP.
“WhatsApp will be able to claim the Facebook share of those markets as well, making it hard for these other guys to grow.”
WeChat, or “Weixin” in Chinese, is a free instant messaging and social media mobile application developed by Chinese Internet giant Tencent and officially launched in January 2011.
It has not only become a popular mobile communications tool in China – where Facebook is mostly blocked and WhatsApp usage is comparatively low – but has also attracted tens of millions of users in overseas markets.
The Facebook deal values active WhatsApp users at US$42 a piece. According to analysts with Japan’s Mizuho bank, WeChat is worth twice that amount “on the back of its gaming, [commerce] and mobile payment potential”.
WeChat’s number of monthly active users worldwide reached 272 million by the end of September last year, more than doubling from a year earlier amid a drive to attract more users in countries such as India, Spain and South Africa.
WeChat provides text, photo, video and voice messaging services on major mobile platforms. It also offers games, online payments and taxi booking.
Launched in 2011 as an instant message and free voice call app, Line – whose parent company is South Korea’s Naver Corp. – has grown to 350 million users worldwide and aims to hit 500 million this year.
Its user-friendly interface and voice communication capacity have helped it become one of most successful apps in Japan, while also seeing popularity in Thailand, Taiwan, Spain and Latin America.
The app is best known for “stickers” – cartoon-like images purchased by users, sales of which are core to Line’s revenues.
Launched in 2010, Kakao Talk is used by 95 per cent of South Korea’s smartphone users and boasts 130 million users worldwide. It is reported to be preparing for an initial public offering next year that could value it at US$2 billion.
The free app allows users to send messages, pictures, soundbites and video via the Internet, either on WiFi or through cellphone networks.
Gifts can be bought using Kakao’s online shopping facilities, a feature that helped push revenue last year to 230 billion won (US$215 million) from 46 billion won a year ago.
It is eyeing Southeast Asian markets including Malaysia, the Philippines and Indonesia where it is fighting for market share against Line and WeChat.
Developed by Cyprus-based Viber Media, which was founded in 2010, the service boasts 280 million users and was recently purchased by Japanese IT firm Rakuten for US$900 million – or roughly US$3 per user. It allows free text messages and phone calls as well as video messaging. It recently launched a service allowing desktop users to call non-Viber users’ mobile phones, in a challenge to Skype, owned by Microsoft.
Analysts have questioned whether it can make more money from customers in the same way that the likes of Line and WeChat have, leading to Rakuten’s share price plunging as much as 13 per cent on the first trading day after it announced the deal.
Two popular mobile apps, Kuaidi Dache and Didi Dache (“dache” means taking the taxi), make it possible for passengers to hail a cab without flailing an arm, but just tapping on their smart phones.
The war between the two apps, which are backed by Chinese Internet giants Alibaba Group and Tencent Holdings Ltd respectively, has gotten more intense this week.
On Monday, Didi Dache announced that it was going to revive its 10-yuan (RM5.42) rebate programme for users who book a cab and pay via Tencent’s instant messaging app Wechat.
Every passenger is entitled to receive a subsidy of 10 yuan each trip, for up to three trips a day.
For taxi drivers in Beijing, Shanghai, Shenzhen and Hangzhou, a reward of 10 yuan awaits for up to 10 bookings they successfully respond to through Didi Dache.
Cabbies in other cities will receive 5 yuan (RM2.71) for the first five trips and 10 yuan for the next five trips.
To prevent users from cheating, Didi Dache said it would block passengers and drivers who reach mutual agreements to use the app only after the passengers get into the cabs, with the motive of earning the rebates.
Didi Dache reportedly poured in 1bil yuan (RM542.18mil) for this round of subsidy.
Kuaidi Dache was quick to follow up with an “always-one-yuan-more” reward.
Users who hail a cab through its app and pay via Alibaba’s mobile payment service Alipay Wallet were promised that they would always enjoy one yuan more than users of its competitor.
It is not the first time these two apps are using these tactics to entice users.
In January, Didi Dache rolled out the 10-yuan rebate promotion, prompting Kuaidi Dache to offer the same rebate in response.
When Didi Dache reduced the 10-yuan incentive by half on Feb 10, Kuaidi Dache seized the chance to announce that it would retain the 10-yuan offer.
Now that Didi Dache has readjusted the rebate back to 10 yuan, Kuaidi Dache has decided to have the upper hand by pledging “always-one-yuan-more”.
However, just a day after these announcements were made, Didi Dache upped the rebate once again. Passengers would now receive between 12 yuan and 20 yuan (RM6.51 and RM10.84) per trip.
Kuaidi Dache followed suit to offer a subsidy of at least 13 yuan (RM7.05) per trip.
While Didi Dache offered 10,000 free trips a day to lucky passengers, Kuaidi Dache pledged 15,000 free trips a day.
It appeared that there was no end to this intense price war.
This “war” between the two apps is only one segment of the fierce rivalry between the two Internet companies, Tencent and Alibaba.
Tencent owns Wechat while Alibaba has developed a similar app known as “Laiwang”.
Alibaba bought 18% stake of the popular Twitter-like service Sina Weibo last year, which is the contender of Tencent’s Wechat.
Last week, Alibaba offered to purchase mobile mapping app AutoNavi. Tencent, meanwhile, already has a mapping service that boasts a similar function to Google’s Street View.
This latest contest in the taxi-booking app was seen as a tactic to encourage smart phone users to adopt the habit of using mobile payments.
During the just-concluded Chinese New Year holiday, Wechat users went gaga over the electronic angpao.
They had to first link their bank accounts to Wechat before they could give or receive money among their circle of friends.
According to Beijing Times, from the eve until the eighth day of Chinese New Year, more than 40 million angpao were handed out in the activity participated by more than eight million people.
Even Alibaba’s founder Jack Ma described the phenomenon as a “Pearl Harbour attack”.
In a poll on finance.ifeng.com, 70.42% of some 5,600 respondents felt that the war of taxi booking apps between Tencent and Alibaba was not a vicious competition.
Almost half of them believed that what mattered most at the end of the day was the product experience.
They were of the opinion that the company with the better service would prevail, in contrast to only 23.38% of the respondents who predicted that the one with bigger financial capability would eventually be declared the winner.
With the two giants locking horns and trying to outdo each other, many believed that the consumers are the biggest beneficiaries.
The rebates did not have a reported deadline. Until the cash rewards are withdrawn, users can continue to enjoy the subsidies to save some pennies.
Contributed by Tho Xin Yi The Star/Asia News Network