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WeChat has become China’s most popular everyday mobile app since its initial release – as Weixin, its Chinese-language version – in January 2011. Photo: Shutterstock

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Inside China Tech: Tencent supercharges WeChat

Tencent’s proposed buyout of Sogou seems to indicate aggressive plans to further integrate China’s No 2 search engine into WeChat
It may shake up a market long dominated by Baidu and fend off potential competition from TikTok owner ByteDance

China technology

Bien Perez

Published: 7:00am, 1 Aug 2020

Why you can trust SCMP

Hello, This is Bien Perez from the SCMP’s Technology desk with a wrap of this week’s leading stories.

Super app WeChat, the multipurpose messaging and social media platform run by Tencent Holdings, may end up as the major beneficiary of its parent company’s US$2.1 billion buyout bid of Sogou, China’s second-largest online search service.

Tencent’s proposed acquisition of the 61 per cent stake in Sogou that it does not yet own may shake up a market long dominated by Baidu and fend off potential competition from TikTok owner ByteDance, according to analysts.

The offer seems to indicate aggressive plans to further integrate Sogou’s search engine into WeChat, according to Mark Natkin, managing director of Marbridge Consulting in Beijing. Sogou has long been used as the default search engine in WeChat, which has more than 1.2 billion monthly active users.

“WeChat is probably the first app most Chinese internet users open in the morning, and the last one they check before bedtime, so it has the potential to be an extremely effective channel for search queries,” Natkin said. He added that Tencent’s full control of Sogou would make integration easier and allow the internet giant to enjoy all the profits that such a combination of resources might generate.

02:28

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The Sogou deal comes as WeChat has become China’s most popular everyday mobile app since its initial release – as Weixin, its Chinese-language version – in January 2011. The app enables users to chat, post pictures, play games, shop, read news and pay for meals, as well as book a doctor’s appointment or arrange a time slot to file for a divorce at the civil affairs authority.

Competition in China’s online search market has become more intense after ByteDance entered the space with Toutiao Search in August last year and its app version this February. Baidu currently dominates that market with about a 66 per cent share, followed by Sogou with 22 per cent, according to data from internet traffic monitor Statcounter in June.

Before Sogou announced the proposed buyout offer on Monday, Tencent was already moving to supercharge WeChat. Allen Zhang Xiaolong, president of the Weixin Group within Tencent, wrote in a private WeChat post that the app’s new short video feature, Channels, has accumulated about 200 million users since it started beta-testing in late January.

With that new feature, WeChat directly competes against domestic short video app market leaders Douyin, the Chinese version of TikTok, and Tencent-backed Kuaishou.

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Outside China, however, things are not looking so hot for WeChat. It has ceased operations in India weeks after a previously announced ban, dealing a blow to millions of users in the world’s second-most populous country.

“We are engaging with relevant authorities and hope to be able to resume service in the future,” said a notice sent by WeChat on Saturday to an undetermined number of Indian users, who were unable to log into the app.

Earlier this month, US Secretary of State Mike Pompeo said Washington could sanction Chinese social media apps, including TikTok and WeChat, over privacy issues and potential national security risks. That has sparked anxiety among many overseas Chinese who use WeChat to keep in touch with family and friends back home, as well as many western companies and individuals who use the app for business.

Shoppers check out the latest smartphone models from Huawei Technologies at one of the company’s stores in Beijing on July 15. Photo: AP

Huawei tops Samsung in global smartphone shipments

Beleaguered telecommunications giant Huawei Technologies received some good news this week, after overtaking Samsung Electronics for the first time in global smartphone shipments on the back of strong demand in China as its economy recovers from the coronavirus crisis.

Shenzhen-based Huawei shipped 55.8 million Android smartphones in the second quarter, edging out Samsung’s 53.7 million total tally in the same period, according to a report from research firm Canalys on Thursday.

“If it wasn’t for Covid-19, it wouldn’t have happened,” said Canalys senior analyst Ben Stanton in the report. “Huawei has taken full advantage of the Chinese economic recovery to reignite its smartphone business.”

It marked the first quarter in nine years that a company other than Samsung or Apple has led the global smartphone market, according to Canalys.

01:23

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Beyond showing Huawei’s strength under US sanctions, the achievement also reflects the Chinese economy’s resilience. China avoided a recession after its economy grew by 3.2 per cent in the second quarter, the first major market in the world to show a recovery from the damage caused by the coronavirus pandemic.

On Tuesday, a report from the SCMP’s Zhou Xin said Huawei was considering all possible options against HSBC for allegedly presenting “misleading evidence” that resulted in the arrest of its chief financial officer, Meng Wanzhou, in Canada, according to people familiar with the matter.

If Huawei goes ahead, it would further heat up the legal battle on whether Meng, the daughter of Huawei founder and chief executive Ren Zhengfei, should be extradited to the United States.

Some investors of Beijing-based ByteDance, owner of TikTok, are seeking to take over the popular short video app after valuing it at about US$50 billion. Photo: Reuters

TikTok faces more scrutiny overseas

Unrelenting US pressure, a border spat between China and India, and escalating global concerns over data security and privacy threaten to derail the international expansion of short video app TikTok and its parent company ByteDance.

TikTok, which has Chinese-language version Douyin serving mainland users, has become one of the most heavily downloaded apps worldwide since it was launched overseas in 2017, but that rapid growth has been marred by problems with regulators in major markets like the US and India.

India’s recent ban of Chinese apps, including TikTok, could cost ByteDance US$6 billion in losses, according to a report by Chinese media outlet Caixin earlier this month, citing anonymous sources.

If the US also blocks the app – an option Secretary of State Mike Pompeo has said the Trump administration was exploring – some investors calculated that it would reduce ByteDance’s value by 30 per cent in a sale or initial public offering, according to a report last week by The Information.

US senators urge Justice Department to investigate Zoom and Tiktok’s ties to Beijing

Those issues, however, are interpreted as an opportunity by industry insiders. Some investors of ByteDance are seeking to take over TikTok after valuing it at about US$50 billion, significantly more than peers such as Snap, according to a Reuters report that cited people familiar with the matter.

Beijing-based ByteDance has received a proposal from some of its investors, including Sequoia Capital and General Atlantic, to transfer majority ownership of TikTok to them, the sources said.

TikTok is still growing as it rakes in more cash from advertising, and its management team expects to achieve US$6 billion in revenue in 2021, one of the sources said.

And that’s all for this week. Until next time.

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