What’s Up And What’s Down?

Jimmy Hsiao Jimmy's Corner Leave a Comment

Life and business usually consist of of many ups and downs. In these past few months, I’ve seen some ups and downs worth mentioning.

What’s up? WhatsApp! In fact, the company (named WhatsApp) had an almost unthinkably high “up” in February when Facebook acquired it for $19 billion. The start up has only been around for five years. There has been no company with such a high valuation after only five years.

With 450 million users, WhatsApp dominates the mobile messaging app markets in the US and Europe, but other apps dominate elsewhere in the world.

Messaging…my mother and my mother-in-law both have one single reason to use their iPads – it is the cheapest and easiest way to communicate with their children because of the abundance of good messaging apps. My mother-in-law first discovered the beauty of Skype: that she can talk, conference, and message for free. For a nominal fee, she can even make international calls to an actual telephone number. She is only one touch on a big iPad screen away from us. We can’t escape her.

My mother also discovered the power of messaging through an app called Line, which is the top-ranked messaging app in Taiwan, Korea, and Japan. Now she constantly sends me Chinese text, photos, and video links. Line is pretty much free for messaging, but nonetheless it generated $335M of revenue in 2013, which makes it the all-time highest grossing non-game app with at least 360 million users.

The other big player of the message app space is WeChat ( 微信 ) .  Forbes magazine calls it “One of the World’s Most Powerful Apps.” WeChat is Tencent’s (one of the big three internet companies in China) flagship mobile app. WeChat was launched in January of 2011, and has now close to 400 million users. There is no application that has such a rapid adoption in the history of software.

Prior to WeChat, which is more a mobile-based messaging app, Tencent was very successful with its QQ internet instant messaging system. WeChat is so powerful that it has essentially created an ecosystem that includes gaming, payment, audio messaging, and photo sharing. Logic’s Showcase product is now “WeChat” capable in China, because our clients insisted that the best way to communicate with their customers is through WeChat, not email.

With the popularity of WeChat, Tencent’s market value has now surpassed the market value of Intel at $150B. What’s up is not just Tencent’s market value, but also its biggest rival in China, Alibaba, which is about to launch their IPO in the US with a market valuation between $150B and $200B. It looks like that all Mr. Horse got a head start with the year of Horse. (Jack Ma founded Alibaba and Huaten Ma founded Tencent, Ma means Horse in Chinese. Here is my blog post about Year of the Horse that mentioned Mr. Ma)

Both Alibaba and Tencent have driven up the use of the app in other areas as well. When I was in Nanjing China last time, I had tough time getting a taxi to go back to my hotel. I told my office assistant Olive, “the taxi is difficult to get even at off-peak time nowadays”. She replied, “Actually, it is a lot easier to get taxi now, just use Di Di or Kuai Di.”

Di Di is the taxi-app from Tencent, and Kuai Di is the taxi-app from Alibaba. With either app, the user can see all nearby taxis and request a pick up from a specific cab. The driver then sees the requests on their mobile app, which quickly leads him via the phone’s GPS to the customer’s location.

The customer acquisition cost has been more than $3B between the two companies, by giving discounts to the customers and bonus to the taxi drivers for every ride. The results of this taxi-app war were incredible. There are 11.5 million uses of these two taxi apps per day. And while these types of apps are new, it took two internet giants only one year to push them from almost non-existence to “the way” to get a taxi.

Behind the practical use of the free taxi software, there is a hidden emerging business model for other related paid apps. You see, WeChat is not just a social app, it is also becoming a monetary transaction tool like PayPal. After a taxi ride, you can immediately authorize your WeChat to make payment. The driver’s app and the customer’s app talk to each other to complete the transaction. Similarly, most Chinese are used to AliPay from Alibaba since that is the way to purchase things from the enormous eCommerce site of Alibaba. At the end of a taxi ride, you can use AliPay to complete the payment.

Alibaba’s inroad to the financial sector did not end with AliPay. Its YuErBao(餘額寶) is becoming the fourth largest money market-fund in the world. It was only launched one year ago.

The words Yu Er means “left over money”. Bao means treasure. The idea is that you can transfer any amount of money, as little as 1 RMB, to YuErBao anytime from your phone without any penalty. The interest rate was as high as 7%, while most of bank rates hovered around 1%. Many people transfer a small amount of their AliPay money to YuErBao to try it out. Once they get a taste of the good returns, they put more money to that account. The accumulation of left-over money from various places over time will become a personal treasure. The front end is easy to use, but back end does all the magic.

So much is up, so what’s down? Well, more and more people’s heads are down. My dad asked me, “are you contributing to the growth of Heads Down Tribe? 低頭族)”

At first, I did not catch what he meant, and he explained, “Don’t you see all the people in the subway with their heads down all the time reading something on their mobile device?” The up rise of mobile apps like WhatsApp, Lines, WeChat, Di Di Taxi, are keeping the heads down.

“Yes, I am a contributor to the growth of Head Down Tribe,” I told my dad, “I develop mobile apps for living!” I just need to think about what the next trend is going to be to keep user’s heads up instead. Logic Glass?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.