Will Tencent Offer More With WeChat Ads?

WeChat has recently announced reaching 700 million active users which further solidified its position as the fastest growing Chinese social media platform. On the other hand, monetization the platform has been a much tougher task for Tencent. WeChat ads, a potential goldmine of mobile marketing, was much slower to get traction.

Just a few years ago, when the service just started, most of WeChat revenue came from selling stickers. Fast forward to the present, with over half of China’s population using the app on daily basis, the revenue mainly comes from gaming and WeChat ads. Recent reports indicate a 22-percent increase in the company’s profit during the fourth quarter of 2015.

How do WeChat ads work?

Unfortunately, there are many problems with WeChat ads marketing and Tencent has been quite inefficient to address them. First, from the user side, the adverts are hated quite universally. This is the main reason that Tencent has recently scaled down the rates at which ads appear inside the accounts.

On the other hand, from the marketers’ perspective, WeChat ads are so expensive that only big brands with deep pockets can afford it. Cost per click goes for RMB 4-5 which is significantly higher than with other digital media in China. Besides, since it shows on a small mobile screen, it is too easy to click a WeChat banner ad by mistake. That doesn’t help with the ROI either.

Another type of WeChat ads, those appears in Moments, WeChat user’s feed, have much more potential. Unfortunately, they are not showing enough to be effective and, for the most part, irrelevant which makes them a nuisance.

WeChat has been slow to introduce so called programmatic ads buying system, instead relying on contract between the platform and advertisers. Although, the option is now available to everyone with verified account, it lacks a lot of functionality.

When it comes to accurate targeting, WeChat advertising lacks it almost entirely. Currently, the users can only be targeted by basic demographics like their gender and location set at the time of signing up for the account (which may not even be the same as their present or actual one). There is no way to set define any behavior targeting in the same way as Facebook does it with Facebook ads. Being a mobile network, WeChat doesn’t even allow retrieving a user’s present location. The only chance to grab their actual location is when users initiate some type of interaction with the official account, such as via chat or built-in functions.

This approach has probably a lot to do with the fact that WeChat positions itself as a private communication tool first and everything else second. It is not a discovery network like Weibo, as users primarily interact within their circle of connections and with the official accounts they have followed. Tencent does not allow for a 3rd party to get data on a specific user behaviors, their connections or what they share or like.

There are certainly many people in China who appreciate it, however, as studies with other Chinese social networks have shown, Chinese are not as concerned about privacy as their Western counterparts.

Clearly, Tencent could do so much more with their WeChat ads to make the system “marketer’s friendly” and, at the same time, benefiting users by displaying relevant ads other then annoying junk. Rumors are that something is in the works and we are going to see some changes this year.