INTERNET：WHEN WECHAT BECOMES AN “ALMIGHTY” OPERATING SYSTEM
Late on May 18, WeChat launched a new version（v.6.5.8）， with search and info feed functions more prominent,and the Payment function prioritized, along with other updates.
Search: Currently, users can find WeChat moment, OA content,literature, music and emoji with the “search” function, whilemost external contents are not searchable, except Sogou Wikiand Zhihu （both invested by Tencent）。 According to Sogou’s CEO,Xiaochuan Wang, WeChat will not enter general search itself,unless through collaboration with Sogou, thus posing a potentialupside for Sogou and a threat to Baidu.
Info feeds: With a more conspicuous position, info feeds couldhave high monetization potential. Users can find articlesrecommended based on users’ social relationships and interests,a natural advantage from WeChat’s account system and ~90mindaily time spent per DAU, over all existing players, includingToutiao & Baidu. Thus, we expect users’ time spent insideWeChat to be extended further, creating more and highlyattractively ad inventories, given the accuracy of its marketing.Despite cannibalization for Tencent News and Kuaibao, this newproduct format can have higher growth potential and larger TAM.
Other: WeChat has put the Payment function in the topposition in sub tab of “Me,” manifesting its ambition to developpayment business. Users have also welcomed many other fineadjustments 。
Tencent is the best positioned among Chinese internetcompanies, given the device people use most frequently is stillmobile, and WeChat occupies more of users’ time, movingtoward the role of an “Almighty” OS, enabling more and moremonetization potential. Through the new version, we can clearlysense WeChat’s intention to keep users while cautiously addingfunctions to protect user experience. Meanwhile, as incrementalbudget in the online ad market is limited （~Rmb60bn grossannually）， we see a potential threat to other online ad players ifWeChat keeps growing stronger.
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