WeChat, or Weixin in Chinese, turns three today. It has become everything, communication, social sharing, entertainment (i.e. gaming), m-commerce, m-payment/banking, and so on mobile. At same time it has had a huge user base, over 600 million registered accounts and 272 million monthly active users. There are high hopes on it, expecting it to be the first global Chinese Internet service or become a money printer.

But what if it is at its peak in terms of user growth and the future revenue sources are just those with Tencent’s QQ instant messaging service? Is it possible 2014 will turn out to be a hard year for it?

There were 500 million mobile Internet users in China as of 2013, according to the latest CNNIC report.  In August last year Tencent announced 100 million overseas users. Assuming there was no sudden decrease in overseas accounts, almost all Chinese mobile Internet users have signed up to it — as you may know Chinese companies would always inflate numbers, but it’s safe to say almost all Chinese smartphone users have WeChat in their phones. The future user growth in domestic market will be, at best, in line with the organic increase in new mobile Internet adopters. So to keep the current growth rate, WeChat has to count on overseas markets.

WeChat

                                                            Source: Tencent, Media Reports

Of WeChat’s top overseas markets, as disclosed when it announced 70 million overseas users in last July, most are in Asia and one (Mexico) in Latin America — Singapore is the only developed country. During 2013 promotional activities in overseas countries by WeChat include TV ad campaigns, ad placements on mobile advertising platforms, and hiring celebrities. At the end of the year, WeChat managed to get into top ten in the communication category in almost all of those markets.

WeChat Download Rank History on iOS in the Communication Category

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                                                                      Source: AppAnnie

WeChat Download Rank History on Google Play in the Communication Category

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But Tencent knows better than most that,  when it comes to communication, it’s a the-No.-1-takes-it-all game. The major reason that the company has been standing stably in China Internet market is its QQ IM has almost all Chinese Internet users, their friends and relatives. User base means a lot for a free communication app in terms of monetization. And eventually users would stick to a few of such services where they can find everyone when needed.

Competitors in overseas markets seem even more powerful than WeChat. Whatsapp announced 350 million monthly active users (MAU) in last October and WeChat’s were 272 million as of Q3 2013 — Whatsapp claimed 400 mn two months after that. Line announced 300 million registrations last November, claiming it was ranked first among free apps in 60 countries.

WeChat started receiving revenues in 2013 from mobile games, sticker sales, custom SIM card sales, e-commerce sales through Tencent’s online retailer Yixun and probably revenue shares from third-party merchants under a program called Microlife.

But, all of those approaches are what Tencent has been making money in its QQ IM world. Tencent still made more than 50% of revenues from licensed games and some in-house developed games, according to its latest earnings release. Mobile games on WeChat have generated good money since 2013, the year when mobile gaming really took off in China.

The second largest revenue source, one of the first for the company years back, is premium subscription. Tencent offers two dozens of monthly paid subscriptions. The prices don’t vary much. Differences but are in which, virtual items for avatars or social spaces, items for gaming, digital music, or other premium features, are more or fewer included in a package. The custom SIM card, jointly issued with China Unicom, works exactly like the QQ subscriptions. The stickers will possibly be included in packages for users to subscribe to, too.

M-commerce, including direct good sales and online-to-offline services, is considered the promising for WeChat, or mobile apps in general. For Tencent, monetizing gaming and virtual items/services are what it’s expert at. But Tencent is known for being poor at e-commerce regardless of its huge user base.

Since 2005 Tencent has been working on either Taobao-like marketplace or online retailer. But it lost to Alibaba and a few other players. It didn’t figure out a way there until the acquisition of an 80% stake in Yixun. But so far Yixun, like many other online retailers, is still a thin margin business. Microlife is a WeChat program for merchants on Tencent’s local service platform to reach and engage WeChat users. The local service platform itself, however, isn’t successful either.

The existing big players in e-commerce are well aware of the mobile trend too. Alipay Wallet, the mobile app by Alibaba, now has almost all m-commerce related features WeChat has created. WeChat Payment, launched in 2013, is considered the very tool that upgraded WeChat to become a m-commerce player. But Alipay is the dominator in digital payment market in China and has been working hard on its mobile app and offline expansion. More recently Alibaba and Tencent became direct competitors in taxi app. Each of them is backing a major player, injecting funding, bundling taxi hauling feature to their flagship mobile apps, and fighting for drivers and customers with cash reward.

The competition in m-commerce will be about who moves faster. Some argues that WeChat will win out as Alibaba doesn’t have social product to have users stick around. But mind you, Alibaba has successfully converted Sina Weibo, the Chinese Twitter, a shopping mall that users can purchase the Taobao/Tmall goods shared by whoever they followed on Weibo or advertisers. Mind you again, Alibaba has made it impossible to show a Taobao/Tmall item page within WeChat.