A week after Tencent’s co-founder Pony Ma emphasized that short video is key to the tech giant’s future, the company’s short video service WeChat Channels announced that it is set to charge e-commerce merchants a 1% to 5% commission fee in the coming year, according to a report by local media outlet Tech Planet.
Why it matters: Tencent’s rebounding profit growth in the July-September period after four consecutive quarters of decline is a sign of the company’s gains from its ongoing cost-cutting measures, but finding new revenue streams remains a priority. With 800 million monthly active users, WeChat Channels (a TikTok-like short video platform within the messaging app) provides a clear monetization opportunity.
- Tencent recorded its first-ever quarterly revenue decline of 3% year-on-year in the second quarter of 2022 and a 2% decline in the following quarter. Weak online advertising revenue was the main factor dragging down the company’s growth.
Details: The total value of live commerce sales generated from WeChat’s short video platform is between RMB 40 billion to RMB 50 billion ($57.5 billion to $71.9 billion), a service provider close to the unit told Tech Planet.
- The report said Tencent’s short video platform will charge different service fees based on different categories, with the highest rate of 5% applying to personal care, underwear, sports and outdoors, baby and maternity, and home and kitchen.
- Tencent is offering new merchants preferential policies, with the commission reduced to 1% for transactions of RMB 1 million or less during the first 30 days.
- TikTok’s sister app Douyin has been charging 1% to 10% for technical services fees since February 2020, while rival Kuaishou requires merchants to pay 5% of the actual transaction value of an order.
Context: Tencent has seen users’ total time spent on WeChat Channels exceed 80% of the time spent on WeChat Moments (the app’s friend feed). The total number of viewers of video on the platform increased by 200% compared to the same period last year, the firm’s President Martin Lau said on the company’s second-quarter earnings call.
- WeChat’s video unit set up a live-commerce team last July, with its daily transaction value reportedly reaching RMB 100 million for the first time in September.
- In addition to the emerging role of the e-commerce business, video account ads are also being regarded as a major way for Tencent to expand its revenue. Lau said he expected quarterly revenue from in-feed ads to surpass RMB 1 billion in the fourth quarter.
- WeChat has launched a variety of advertising formats for businesses, including WeChat Moment ads on users’ friend feeds, official account ads, mini-program ads, video account ads, and search ads, with two to five options in each format.