China Insights

WeChat Moments Ad – Tencent’s next growth engine?

Han Yang

Consultant, Market Insights China Lead

Social 23.01.2015 / 10:25

WeChat Logo

Kantar Retail goes through official information from WeChat team and analyzes the rules of WeChat Moments feed ad.

On January 21, when some WeChat users checked their WeChat mobile app, they were surprised to see a testing advertisement in the Moments module - a post from WeChat Team, consisting of six black-and-white text pictures. Together, they formed this paragraph:

"It is everywhere. You have nowhere to hide. It's not disgusting. It just doesn't understand (your need). We are trying to make some changes."

(Users can opt out of this feed ad by clicking "not interested" from a pull-down menu on the top right corner of the ad.)

Very few people know that WeChat was launched on January 21, 2011. The team started to test advertisement in WeChat Moments feed on its fourth birthday.

Kantar Retail goes through official information from WeChat team and analyzes the rules of WeChat Moments feed advertisement here.

New form of advertising

According to the official WeChat advertisement introduction document obtained by Kantar Retail, the details of WeChat Moments feed ads are as following:

1. Display format

Moments feed ads will come from subscription accounts and shown on certain users' Moments feed, but will have "Promotion" tag to distinguish the ad with other normal Moments posts.

These ads can have text, url and promotional images. Users can click the advertiser's icon and enter its subscription account to follow it. They can also comment and like such ads just as any other Moments posts. If the user doesn't like certain Moments feed ad, they can opt out it.

2. Audience - "seed users"

Moments feed ads will be shown to users whose profiles fit certain criteria. These users are selected based on their activeness with friends as well as their engagement with advertisement. The system will then leverage seed users' networks to expand the exposure of this ad based on similar interests.

3. Ad journey logic - "likes" matter

Once a user comments on a Moments feed ad or likes it, it will be more likely to appear on the Moments feed of that users' friends and would remain active for seven days. If no one interacts with the feed ad, it will disappear after six hours.

This logic requires feed ads have great quality.

While for each individual user, he/she will see only one Moments feed ad in every 48 hours so WeChat can minimize the harassment on its users.

4. Charging scheme - CPM

The Moments feed ads are charged based on CPM (cost per mille). Advertisers can narrow it down by setting criteria but that also affects the price. If an ad targets a certain gender, its cost will rise 10%. If it targets users in certain city tier, its CPM will rise significantly. If the advertiser wants to insert HTML5 url, it has to file an application to WeChat and its cost will rise 20% as well.

Natural next step for Tencent

So why has the WeChat team, which was famous for being extremely protective of its users' experience, finally opened up this platform for advertisement?

Feed advertisement is a mature business model in foreign social media networks, and has become the major source of mobile ads. Facebook, for example, in Q3 2014, mobile feed ads accounted for 66% of its total revenue. In China, Sina Weibo's feed ads income in Q3 2014 was 438% higher than a year ago to reach US$22.8 million, accounting for 35% of its quarterly ad income.

The huge success of WeChat has made Tencent the owner of China's largest social media gold mine, hence it is understandable that Tencent is now monetizing the massive user base and enormous traffic on the WeChat platform. It is equally worth noticing that according to Tencent's Q3 2014 financial report, its quarterly revenue of 19.81 billion yuan was only 0.3% higher than the previous quarter. Online gaming, which has been supporting Tencent's galloping revenue growth, has begun to lose its steam.

At the same time, online advertisement has kicked in to become Tencent's new propeller: its online advertisement reached 2.44 billion yuan in Q3 2014 - 75.5% higher than a year ago and 18.2% more than the previous quarter.

A fine balance

What other advertisement platform can be better than WeChat? On its fourth birthday, it has more than 1.1 billion registered users and 440 million monthly active users. Moments module, the most popular app within WeChat, triggers more than 3 billion shares every day. It is born to be an ideal ad platform.

Now the challenge is for the WeChat team to keep the fine balance between better user experience and larger advertisement income.

Source: Kantar Retail

Editor's notes

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