The quiet war to become China’s next WeChat

In March, Douyin users in three Chinese cities discovered that the popular short-video app had quietly launched a new Groupon-like feature, a "group buying" feed that allowed users to order takeout, book hotels and reserve tickets and services. It's part of a pattern: Over the past few years, Douyin has beefed up its social network by adding features from livestreaming to ecommerce, from gaming to instant messaging, challenging existing dominant players in each vertical. Now Douyin has expanded into the so-called "local life services," taking on Meituan, a dominant player in this space, which offers a wide range of services meeting users' offline life needs, from food delivery to ticket booking.

It's clear that the young Douyin is not content to be just an entertainment app, however lucrative that may be. Instead, it's one of several Chinese apps engaged in a quiet, high-stakes battle to become the next WeChat, a mega app that now has 1.1 billion monthly active users, 80% of China's total population. In the past decade, WeChat has transformed human interaction in China and grown into an ecosystem for innovation, making it virtually the sole super-app most of China can't live without. The question now is whether anyone can dethrone it.

By nature, Chinese tech companies do not feel encumbered by their "core competencies." And Chinese web users are accustomed to mega apps that do a lot of different things. Tech analysts can't agree on who will take over the throne from WeChat, but they anticipate that WeChat's status as the super app won't survive Beijing's ongoing antitrust drive. This means China may end up with more than one mega app, each favored by different demographics.

Douyin is hardly the only app that's expanding beyond its core business. Meituan is said to be testing a group chat feature. Douyin nemesis Kuaishou is already turning into a communication channel and building a "local life" business center. And a slew of tech companies are adding a mobile wallet feature.

"An app ecosystem that is more diverse is healthy for everyone. Competition creates more innovation and generally more competitive rates and conditions for everyone involved except the tech giants," said Mark Tanner, managing director of Shanghai-based China Skinny, a marketing and research agency. "It will also further build the cottage industries that come from supporting these apps."

Why does every Chinese app want to be WeChat?

It's unsurprising that each popular Chinese mobile app is building a larger footprint, be it a short-video platform, a delivery service or an online marketplace. China's online population growth has slowed after a decade of mobile internet expansion. China now has nearly 1 billion internet users, representing about 70% of the country's total population. Almost every Chinese netizen already uses mobile apps designed by Tencent, Alibaba and Baidu, according to market research firm QuestMobile. In other words, there aren't a whole lot of web users who remain untapped. Afraid of missing the next must-win market, Chinese tech giants tend to add ever more functions to get existing users hooked.

"Failures don't sway them from trying new things, even in ventures that may not make sense to third-party observers," Man-Chung Cheung, a research analyst at eMarketer, a New York-based market research company, told Protocol.

Who will win?

Analysts are generally divided on who's most likely to take the throne from WeChat, or at least share the throne. But some say Douyin is the top contender.

Douyin's not even five years old, but it has already been feuding with WeChat for about three. ByteDance founder Zhang Yiming and Tencent founder Pony Ma were caught bickering publicly on WeChat in 2018; Zhang accused WeChat of blocking and plagiarizing Douyin, which ByteDance owns, and Ma countered that Zhang's accusation was libel. Last year, WeChat launched its own short-video feature, a deliberate challenge to Douyin and Kuaishou. In early February, Douyin brought a lawsuit against Tencent, accusing WeChat of blocking Douyin content.

Meanwhile, netizens are increasingly shifting their attention away from WeChat and toward Douyin, a completely different ecosystem. Douyin and its international counterpart TikTok have routinely topped the global chart of the most downloaded non-game app in Apple's App Store since 2018. Douyin has amassed 550 million monthly active users. Though Tencent's apps, WeChat included, still captured most user attention in 2020, compared with 2019, Chinese smartphone users were spending more time on ByteDance's apps, including Douyin, and spending less time than they previously had on Tencent products, according to QuestMobile.

Douyin is particularly popular among China's youth. Last year, netizens under 30 spent an average of 33 hours on Douyin each month, longer than any other video app. "Douyin is great for discovery and entertainment, while WeChat seems to be where one forms deeper connections and conversations," Cheung said. "I think they are still quite different and there is room for both."

ByteDance is already China's most valuable private company, valued at $180 billion and poised to go public this year. By building an infrastructure for what Douyin calls "interest-based ecommerce" (兴趣电商) and "local life" services, ByteDance expects to see rising revenues and longer usage time. Douyin only dipped into ecommerce in 2019, but has already raked in $76 billion in GMV in 2020, more than tripling its 2019 total, according to the Chinese financial publication LatePost. In January, Douyin's e-wallet pay feature went live. As CCTV's Spring Festival Gala's exclusive virtual red-packet partner (WeChat pioneered this user-acquisition play in 2014 to great success), Douyin doled out a record high $186 million worth of red envelopes during the mid-February holiday, all to attract new users — 70.3 billion interactions, to be exact. In 2020, ad revenue accounted for about 73% of ByteDance's total revenue, and 60% of that was from Douyin. "Local life," on the cusp of becoming a $100 billion market in China, serves as just another opportunity for Douyin to serve ads on behalf of small and medium businesses. Analysts say "local life" services have great growth potential because of their frequent usage.

"[Douyin has] increasingly [wrested] screen time away from WeChat through their AI-driven, intuitive and entertaining user experience, which I expect they will apply to their gaming, ecommerce, payments and other investments to keep users hooked," Tanner said. Although WeChat's No. 1 position in communication is tough to challenge, "based on [Douyin's] current trajectory and additional services, they are on track to surpass WeChat for share of screen time, which in a way makes them the 'next WeChat,'" Tanner said.

But other analysts are not quite convinced that Douyin will replace WeChat as the national app, at least not yet. Douyin's is nowhere near as powerful a communication tool as WeChat, nor Kuaishou. "If anything, the user behavior on Kuaishou initially was very WeChat-like, and even now it encourages much more communication between users than Douyin," tech analyst Rui Ma told Protocol. In terms of social and 'life" services, Ant Financial's Alipay is far more comprehensive than Douyin.

Douyin's ecosystem is too new, and it will take time for users to see it as something more than a time-killer, said Ashley Dudarenok, founder of Alarice, a Chinese social media marketing agency. "I think there will be always WeChat, and there will be a few other players," Dudarenok said, adding that Douyin, its nemesis Kuaishou, Alipay and Meituan are strong contenders to potentially become a super app in a specific segment or for a specific demographic. "I don't think anybody is replacing WeChat."