The globalisation of WeChat, a messaging application owned by Tencent Holdings Ltd, may face a bump in the road after the Chinese Internet giant decided to reduce promotional activities for the app in overseas markets.
Pony Ma, founder and chief executive officer of the Shenzhen-based Tencent, said on Wednesday that the company will stop overseas commercial promotions through hard advertisements as the app's user growth has been plateauing in overseas markets.
"We have spent a lot of money to promote WeChat in overseas markets during the last two years, but the effect is not very obvious now," Ma said in a press conference in Hong Kong.
The move is seen as a drastic change in WeChat's globalisation strategy as Ma announced a year ago that Tencent would invest heavily in marketing and popularizing its WeChat services in international markets.
Ma did not reveal the specific amount of the investment. But in 2013 alone, Tencent spent hundreds of millions of dollars for the internationalization of WeChat.
"Instead of pursuing growth in user numbers, Tencent will strengthen co-operation with music and game operators to build a better ecosystem with better services," Ma said.
WeChat, the most widely used messaging app in China, had 468 million monthly active users at the end of September 2014.
Ma did not reveal the number of WeChat's users outside China. But Martin Lau, president of Tencent, said during the same event on Wednesday that "the absolute majority" of WeChat's current users are based in the Chinese mainland, while others are mainly from Southeast Asia and Hong Kong.
Lu Jingyu, an analyst with Internet consultancy iResearch Group, said the decision may suggest a setback for WeChat's development in overseas markets. "The competition among mobile messaging apps in overseas markets is fierce with a number of powerful players, such as WhatsApp," she said.
However, Lu said given WeChat's solid development inside China, the stumble in overseas markets can hardly hurt its business performance.
Tencent said on Wednesday that its fourth-quarter profit rose 50 per cent as the company generated more money from selling games and advertising to more than 1 billion users of its WeChat and QQ messaging services.
Net income climbed to 5.86 billion yuan (S$1.29 billion) in the three months ending Dec 31, the Hong Kong-listed company said in a statement compared with the 5.93 billion-yuan average of 11 analysts' estimates compiled by Bloomberg.
Lu said that the top priority for Tencent this year is to further WeChat's commercialization.
WeChat kicked off an advertising programme at the end of January, allowing advertisers to send information to its users. The move is seen as a major step to boost advertisement income as WeChat, a social networking tool, is able to target specific demographics such as gender, age and location, via big data technology.