China's Tencent looking at U.S. opportunities for its WeChat app

Tencent's WeChat app could be a threat to Facebook in the mobile Internet market

Chinese Internet giant Tencent is eyeing the U.S. mobile Internet market with its popular WeChat product, a messaging app that lets users send messages, voice recorded notes, and pictures to friends on the service.

"We recently put together a small project team for WeChat to study the U.S. market and explore future potential opportunities," said Tencent's director of investor relations Jerry Huang on Monday in an email.

In China, Tencent is best known as the company behind QQ, the country's largest instant messaging client. It also runs a popular Internet portal, publishes online games, and operates social networking websites. In the third quarter of last year, the company pulled in US$1.8 billion in revenue, which was more than Facebook did.

Tencent's WeChat product has been the latest mobile app to take China by storm and has 300 million user accounts. It is similar to the U.S.'s WhatsApp product.

In China, users view WeChat as a way to send free SMS messages, and save costs on their phone bills, said Michael Clendenin, managing director of consultancy RedTech Advisors. The product is also a convenient way to leave voice messages, in a nation where voice mail is seldom used.

"It's become popular in China, because it's a little cheaper, and it's quite fun," he said. "That's a great formula for success."

Tencent declined to offer a breakdown of its WeChat users by country. But analysts said that WeChat's popularity has been growing outside the country among overseas Chinese users, and in emerging markets such as Indonesia, Latin America and the Middle East.

Chinese Internet companies have so far struggled to become major players in foreign markets. But Tencent is one of the few firms with the potential to succeed in the U.S., Clendenin said. The company already has offices in the country, and has acquired financial stakes in U.S. game developers such as Epic Games and Riot Games.

"It's just the beginning for them," he said. "Even if WeChat isn't wildly successful, if it's a moderate success and get's their name out there, then who knows. Maybe in five years at that point, Tencent will have established a beachhead and improved its reputation."

Analysts also said that the WeChat app is well-designed, and built for an international user base, rather than a Chinese one.

"If you didn't know it was from China, you wouldn't be aware of that," said Duncan Clark, chairman of Beijing-based technology consultancy BDA. "It's transcended it's Chinese-ness."

Tencent has been continually adding new features to the app, to include social networking functions such as a status feed. This could make the app not only a threat to WhatsApp, but also to Facebook, Clark said.

"The Chinese are coming," he added. "They have so much capital. Tencent is neck and neck with Facebook. It's very strong company, and in that respect it has the resources to take on the big guys."

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