The latest technology battle is heating up as Facebook (NASDAQ:FB) and China’s Tencent go head to head to see who can control the market in instant messaging applications.
Facebook’s CEO Mark Zuckerberg recently spent $19 billion on acquiring Whatsapp, an instant messaging application with 460 million users. On the other side is Tencent’s WeChat which provides many of the same services as Whatsapp and was initially developed for Chinese online users who have been prohibited by their government from using most similar western apps such as Facebook and Twitter.
Both apps are showing unprecedented growth with WeChat doubling its number of users from 130 million to 270 million in just 2013 alone. What is significant about these two applications is the geographical split as Whatsapp is predominantly used in the Americas and Europe with WeChat dominating in the Far East and Africa. WhatsApp’s concern is that given the difficulty of breaking into the Chinese market, WeChat would have a massive advantage in using its rapidly growing consumer base to successfully launch into WhatsApp’s core markets without WhatsApp being able to reciprocate.
There are financial implications as well since WhatsApp relies on an annual subscription of $0.99 for a big slice of its income whereas WeChat takes a small percentage of any financial transactions made through the app. This gives WeChat a higher per user income of about $7 compared with WhatsApps $1 prompting market analysts to value WeChat at $30 billion versus the $19 billion Facebook recently paid for WhatsApp. The biggest obstacle to WeChat dominating this race is that it is monitored by the Chinese government raising privacy concerns among many potential consumers.
