The Commercial History of WeChat, and the roles that bots have played.

1. WeChat Therefore We Bot?
The Commercial History of WeChat
May 2016
By Joe Medved (@joevc @LererHippeau)
& Entry Level VC Candidate*
*Contact @joevc for introduction

2. Messaging Has Become the Dominant Social Medium
See full report here: http://www.businessinsider.com/the-messaging-app-report-2015-11

3. Enterprises Want to Join the Conversation

4. Are Bots the Answer?
Sometimes But Not Always
“ How are
you today ”
“ Do you know
tomorrow’s
weather? ”
“ New York ”
“ Where are
you based ”
Summary
of the
weather

5. ?
2010s
2000s
1990s
1980s
1970s
1960s
1950s
SmarterChild: Launched in
2001, this chatbot on AIM &
MSN reached 30M users
Humanoid Robots: Robots
capable of interacting with
humans commercialized
Loebner Prize: Awarded to a
bot that beats the Turing test.
No winners since start in 1990.
Deep Blue: In 1997, IBM’s Deep Blue
chess machine beats world chess
champion Garry Kasparov.
Chinese Room: In 1980, John Searles’ paper Minds, Brains and Programs proposed the “Chinese room”
experiment, arguing that just because a computer can have a conversation by recognizing symbols, it does
not prove the machine can think and have consciousness as the Turing test proclaims.
Interactive Voice Response (IVR): Advances in speech recognition technology spawned the
growth of IVR within the call center industry, enabling automated systems to more efficiently
route callers with a simple, scripted voice interface.
ELIZA: In 1966, MIT Professor Joseph Weizenbaum published ELIZA, a program
applying primitive natural language processing to users’ responses to scripts. ELIZA
utilized pattern matching rules to determine its replies.
Turing Test: In 1950, Alan Turing developed a test of a machine's ability to exhibit intelligent
behavior equivalent to, or indistinguishable from, that of a human. The test requires a machine to
convince users of its human intelligence 70% of the time after five minutes of conversation.
Where Are We in the Bot Evolution?

6. WeChat is Recognized as the Mobile Messaging Pioneer
So what does WeChat’s history tell
us about the potential for
commercialization in messaging,
and what role bots may play?
Connecting 700 million
People with chats, calls and more

7. The Commercial History of WeChat

8. HOUSEHOLD
NAME IN
CHINA
MOBILE
PLATFORM
ENTRY TO
TENCENT
SOCIAL MEDIA
EMPIRE
CENTRAL
COMMUNICATIONS
AND SERVICES
HUB
EXTRA KEY LAYER
TO DIFFERENT
TYPES OF APPS
HIGH USER
STICKINESS ON
HIGHLY
INTEGRATED
PLATFORM
161
355
500
697
0
200
400
600
800
FY2012 FY2013 FY2014 FY2015
WeChat MAU (mm)
WeChat
– From a Messaging App to
the Social Services Hub

9. Moments
• Share articles &
pictures / write posts
• Follow Official
Accounts
(merchants,
celebrities etc.)
WeChat
Started as a Messaging App
Multimedia content
• Send pictures, stickers, files
Message
• Send text, audio messages
• Create group chats
Long-distance calls
• Enables voice call, video call
1
GLOBAL
COMPS
2
3
Find new friends
• “Shake” and
“People Nearby”
enables adding
strangers as
friends

10. Example
China Eastern Airlines Official
Account on WeChat
• Shown as a contact in WeChat
after users add its official account
• Users can check flight info,
reserve tickets, check-in, select
seats, manage membership
through the airline’s WeChat
account
• All subscriptions are gathered under a separate
tab called “Subscriptions”
• Good for individuals or companies that provide
contents as a core service
• Less efficient at collecting data from users and
at providing online services than Service
accounts do
Added Official Accounts for
brands
 Subscription accounts providing news and
media articles – Content is King
WeChat
 Service accounts providing corporate
services to customers – Service is King
China Eastern Airlines
4
4
5
5
• “App-within-an-app”: Not full
scale apps but simple website-like
apps using WeChat’s API
• Benefits early stage companies
that do not have resources to build
a fully developed app

11. • Requests information either by navigating
through menus or sending texts (applies to
simple requests such as checking flight)
• Builds automated responses → reduces
customer calls for businesses
Incorporated Bots into Official Accounts
Weather update on
Yellow Mountain
↓↓↓↓↓↓↓↓
Chumen Wenwen China Southern Airlines
• Google Now / Siri type of digital assistant;
Supports voice recognition
• Answers requests including weather,
restaurants, navigation etc.
• Connects to other third party apps such as
Dianping where users can book restaurants
/ ordering delivery
• Investors include Google
“ Is it going to be
cold in the Yellow
Mountains this
weekend?
“ 4/27 To
Shanghai”
“ Please enter
origin”
“ Beijing ”
“ For what
day? ”
“ 4/27 ”
“ Sorry we don’t
have tickets that
match your need
yet ”
XiaoIce
“ How are
you today ”
“ Do you know
tomorrow’s
weather? ”
“ New York ”
“ Where are
you based ”
Summary
of the
weather
• Developed by Microsoft; A chatbot that
users can add as a friend and casually
converse with. Over 20 million users.
• Able to answer questions such as weather
update, restaurant suggestions etc.
• Not only responds to text messages but also
identifies and reacts to pictures and voice
messages
Some popular bots built
upon WeChat API
6
 More customized, context-based
 More conversational
 More accurate leveraging chat history
 Less apps to be downloaded
 Less 800 customer services calls

12. Tenpay
19%
Others
11%
Alipay
70%
Tenpay
14%
Others
9%
Alipay
77%
Wallet
WeChat Pay
Incorporated Paymentthat
transformed WeChat into a gateway of
m-commerce and enhanced user stickiness
• Each individual or business account
has a unique WeChat QR code that
enables users to pay and receive
money by scanning the code without
adding a contact
• Historical growth
2015 2016
1
8
RED ENVELOP VOLUME
DURING CHINESE NEW YAER (BN)
100
200
300
2014 2015 2016
# OF BANK CARDS BUNDLED2 (MM)
~ 420mm users
(90% of urban
mobile users1)
Source: iResearch
1 QiEZhiKu (owned by Tencent) 2 Bank cards bundled to WeChat Pay and QQ Wallet
3 Includes WeChat payment and QQ Wallet
TENCENT PAYMENT3 HAS GAINED MARKET SHARE OVER ALIPAY
1Q’15 3Q’15
MeilishuoGroup BuyMovie Tickets
SpecialRail & FlightsOrder Taxi

13. • Pay and receive money: card repay,
utilities bills, healthcare bills
• Mobile credits top up
• Link loyalty cards from multiple
merchants to one WeChat account
• Transfer money among friends
• Split bills
• Send out red packets, monetary
gifts given for special occasions
• Crowdfunding
• Wealth management products (i.e.
LiCaiTong)
• Loan application
Wallet
WeChat Pay
GLOBAL
COMPS
7
8
7
7
8 8
8
7
9
9
9
Incorporated Paymentthat
transformed WeChat into a gateway of
m-commerce and enhanced user stickiness
• Facilitate B2C transactions and off-
platform services:
• Enhance C2C transactions:
• Provide various financial products
MeilishuoGroup BuyMovie Tickets
SpecialRail & FlightsOrder Taxi

14. • Access links under “WeChat Wallet” to
some of the most popular third-party apps
to enrich more mobile payment scenarios
• Weidian: Allow third parties to open
stores and connect with consumers on
WeChat
• Virtual app stores: Announced to launch
“Application Account ” where users can
subscribe third party services in HTML5
format
Wallet
WeChat Pay
Evolved into Platformthat integrates
O2O initiatives and third party apps
10
10
Download on the
Virtual App Store
To come….
Order taxi on demand
Book rail / flight tickets online
Online shopping
Reserve seats / buy movies tickets
GLOBAL
COMPS
Provide user reviews of local services
(i.e. restaurants) and group buying
(Bot Store)
MeilishuoGroup BuyMovie Tickets
SpecialRail & FlightsOrder Taxi
Online shopping guide for women

15. Current
Search within Official Accounts, individual /
group chats, and Moments
Search without leaving current dialogues
Bring subscribers to Official Accounts
Access to industry expert articles through
subscription accounts
Available from Sogou platform both on
desktop and mobile
Challenge
Embedded Search function
within chats and accounts GLOBAL
COMPS
11
Much less contents on WeChat than those
on traditional search engines
 How to bring traffic to other WeChat third-
party services (JD.com, Didi Kuaiche etc.)
besides Official Accounts?
Search through Official Accounts
Search through Moments,
Chat history
Higher
stickiness
Search
gateway
More
personal
More
contextual
More traffic
to third party
services

16. E-Coupon
Game
Center
Ads on
Official
Accounts
Ads on
Moments
Accelerated Monetization
through diversified product offerings and
cross-selling opportunities
Sticker
Gallery
Targeted
Ads
Future
monetization on
payment
transactions1
Wealth
management &
other financial
services offerings
1 Tencent currently still subsidizes payment
transactions, which incurs an increasing
burden of bank handling fees

17. Lessons from WeChat

18. Most WeChat Bots Take a Hybrid Approach
• XiaoIce, Microsoft’s conversational bot, has over 20 million users. It functions reasonably well
within the Chinese internet, where conversation is more restricted and less prone to trolling.
• However, the majority of bots are conversation-centric but leverage graphical user navigation
and/or human involvement
• Even as bots inch closer to Turing’s test, GUIs will be utilized in visual messaging platforms
• Most conversational commerce will not be text only. GUIs save 100s of keystrokes.
• As with IVR systems, some complex user requests require human engagement
Chumen
WenWen
China
Southern
Airlines

19. The Power of the Platform
• WeChat has over 10 million Official Accounts operated by third parties. Relatively high data
costs in China benefit WeChat, with users less prone to download apps.
• The entire app ecosystem for Android and iOS is ~2 million each, including games. The bar to
create an Official Account with simple “App-within-an-app” functionality is significantly lower.
• However, WeChat’s platform dominance is similar to Android and iOS, with WeChat’s
proprietary commercial features prioritized much like default apps
Wallet
WeChat Pay

20. “WeChat Wallet” channels exclusively operated by 3rd party services in Tencent’s portfolio
DESCRIPTIONS
TENCENT
INVOLVEMENT KEY INVESTORS
• Tencent
• Wanda Group
• Southern Capital
• Online movie ticket booking platform based on
WeChat, QQ and WePiao App
• 8% market share, 3rd largest
• Dec 2015: Announced to merge with Gewara to
consolidate ~ 30% of the market share
• Developed by Beijing
Weiying Technologies, a
company owned by
Tencent, Wanda Group
etc.in 2012
• Tencent
• Alibaba
• SoftBank
• DST Global
• Temasek
• Added to WeChat
platform in Jan 2014
• Invested in Didi Dache
since Series B in 2013
• Feb 2015: Didi Dache and Kuaidi Dache merged
into Didi Chuxing, forming Chinese biggest taxi-
hailing platform
• 21mm cab rides were booked in the first month after
integration into WeChat platform
DIDI CHUXING
• Level 1 access to WeChat
platform since Mar 2014
(accessed under
“Discover” as well as
under “Wallet”
• Purchased 15% (~
$220mm) in 2014
• Chinese largest B2C e-commerce platform that
offers online direct sales in electronics and general
merchandise
• Mar 2014: Merged with Tencent’s online
marketplace Paipai and Yixun
• Mar 2015: WeChat and QQ together drove ~20% of
JD.com’s new customers
• Tencent
• Tiger Global
• KPCB
• Sequoia Capital
JD.COM
WEPIAO
LY.COM
• Added to WeChat
platform in Apr 2014
• Tencent
• Ctrip
• Chinese online travel booking services including rail
and flight tickets booking
DIANPING
• Oct 2015: Dianping and Meituan merged to form a
dominant player in the group-buying and local
services businesses
• Jul 2014: Experienced ~ 86% y-o-y growth in MAUs
one quarter after landing on WeChat
• Tencent
• Alibaba
• Acquired ~ 20% of
Dianping and integrated it
on WeChat in Feb 2014
E-COMMERCETAXI
HAILING
MOVIE
BOOKING
LOCAL
SERVICES
TRAVEL
BOOKING
• Added to WeChat
platform in Mar 2014
• Tencent
• Sequoia Capital
• GGV
• Provides Pinterest-like functions that enable women
to find clothing and skin care products
• Jan 2016: Acquired by MojujieMEILISHUO
Investing in Exclusive Commercial Partners

21. CONCLUSION: Bots Are A Nascent Contributor to WeChat
• After stickers, monetization at WeChat was driven by the introduction of Official Accounts and
their lightweight, app-within-an-app capabilities
• Payments, Platform & Exclusive 3rd Party Apps, Commerce, Branding, Search, and Games have
contributed to the commercialization of the world’s most innovative messaging platform
• Bots have immense potential but are just starting to play a role on the WeChat platform
• Broad bot functionality requires massive investment. Cash-rich companies like Amazon (Echo),
Apple (Siri), Facebook (M), Google (Now), Microsoft (Cortana, XiaoIce) & SoftBank (Pepper) are
in the early days of developing bots with seamless conversational capabilities. A few startups
like Viv, comprised of the former Siri team, will compete to build the leading bot platform.
• A wider array of bot startup opportunities will focus on discreet use cases like scheduling with
x.ai or weather with Poncho, or rely on some human involvement for broader use cases like Fin.
There is also an opportunity for cross platform bot development tools. Beyond just bots, startups
can also offer a broader suite of messaging solutions for brands like Snaps.
• For enterprises looking to follow consumers into the messaging world, bots alone are not yet
ready to facilitate frictionless conversational commerce. The chase for the Turing test continues.

22.  General
 http://www.businessinsider.com/the-messaging-app-report-2015-11
 https://www.techinasia.com/talk/5-ways-mobile-messaging-evolve
 http://blog.appannie.com/messaging-apps-where-theyre-popular-and-major-revenue-opportunities/
 http://www.scaruffi.com/mind/ai.html
 WeChat related
 http://techcrunch.com/2015/11/26/the-many-ways-of-wechat-how-messaging-is-eating-the-world/
 https://www.techinasia.com/wechat-697-million-monthly-active-users
 http://techcrunch.com/2016/03/17/messaging-app-wechat-is-becoming-a-mobile-payment-giant-in-china/
 http://qrcodetracking.com/qr-codes-help-wechat-become-a-social-media-platform/
 https://walkthechat.com/wechat-public-accounts-difference-subscription-service-accounts/
 http://dangrover.com/archive/
 Apps within an app model: https://blog.passkit.com/wechat-offers-insight-into-the-future-of-apps-and-mobile-payments/
 WeChat Third Party Apps
 JD: http://technode.com/2015/03/04/tencent-mobile-messaging-apps-drove-20-percent-of-new-customers-for-jd-in-q4-2014/
 JD: http://blogs.wsj.com/chinarealtime/2016/01/06/qa-with-jd-mall-ceo-on-balancing-shopping-and-social/
 Didi: https://www.techinasia.com/wechat-21-million-taxi-rides-booked
 Facebook related
 http://techcrunch.com/2016/03/17/facebooks-messenger-in-a-bot-store/
Sources