China Mobile blames Wechat for falling profitsUpdated: 2013-11-05 14:33
China Mobile said earlier this week that its net profit dropped nearly 9 percent in the third quarter of this year, and it said instant-messaging apps have created what it calls severe difficulties for the company.
Professor Cai Shujun from CEIBS says, "The conflict was very much there. They feel very very unhappy. They never expect WeChat to be a competitor. And all of a sudden, you can even make a video call for free using WeChat. And that eclipses the profit of the mobile service carriers."
China's biggest instant-messaging app operator Tencent says its has about 600 million WeChat users in China, and another 40 million overseas. Some say WeChat lets them do things they can't with regular phone calls or text messages.
A Wechat user says, "I will follow the accounts that provide good articles, and they are much like magazines. And I also follow my bank account, through which I can collect my credit points and some gifts."
Another user says, "I connected my bank account to my WeChat account, and I subscribed to some business accounts for coupons. I talk with friends and family, which saves me money on my phone bill."
WeChat added a payment function in August, and it also began selling business accounts for 300 yuan a year. These accounts enable business owners to get some information about ordinary users and to push advertisement to their accounts directly.
Professor Cai adds, "The initiative plan is to penetrate to the market. And most of commercial entities, they will think of a way to give you some incentive to use it. So after they become addicted to the apps, then they start thinking about making money."
But another analyst said instant-messaging app operators don't really cut off the profits of Chinese mobile service carriers as bandwidth providers.
Gu Weiran CBS Interactive says, "The app operators have to compete for users by providing enough brandwidth to make their services smooth. When the number of users reach a certain level, the apps like WeChat will demand huge bandwidth for their services, and very much rely on mobile service carriers."
WeChat's monthly revenues have been estimated at 300 million yuan.