Online messaging gets more crowded

By Ding Yining
0 Comment(s)Print E-mail Shanghai Daily, September 17, 2013
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A new smartphone tool partnered by China Telecom and online game and portal operator NetEase suggests that telecommunications giants and Internet companies are eager to move into new realms in online messaging.

China Telecom, the nation’s third-biggest mobile carrier, holds 73 percent of Zhejiang Yixin Corp, the venture that is operating the new messaging product. NetEase holds the remaining stake.

Launched in late August, Yixin boasts new features such as free text and voice messages across all telecom networks as well as incentives such as free data packages for China Telecom users.

“It’s a major step for China Telecom to seek additional revenue beyond its core telecommunication business, but it’s a defensive move,” research firm Analysys International said in a research note.

Smartphone users are spending more on mobile instant messaging tools instead of text messages, which cost 0.1 yuan each.

These so-called “over-the-top” services, meaning applications that run on telecom operators’ mobile data services or WiFi connections, include WhatsApp, Tencent’s WeChat and China Mobile’s Fetion.

The number of mobile instant messaging users climbed 13 percent in the first half to 397 million, according to a report by state-backed China Internet Network Information Center.

In the most recent six months, China Telecom’s mobile phone data traffic income nearly doubled from a year earlier to 9.8 billion yuan (US$1.58 billion), but that still represents a small fraction of overall revenue. Nearly 50 percent of its income came from fixed-line broadband charges and from mobile phone voice calls, text messages and other value-added services.

In its first week of operation, Yixin claimed to have attracted 5 million users, still a small figure compared to more than 300 million users of Tencent’s WeChat.

“There’s still a lot of opportunity for mobile instant messaging applications, and the younger generation wants more fashionable applications,” NetEase Chief Executive Officer William Ding told a media briefing at the product launch in Beijing.

Yixin is a key step for NetEase, offering a new platform for the company to expand services such as online music streaming and gaming to users on smart devices, according to Ding.

Zhang Zheng, general manager of Yixin, said he expects the new application to have 100 million users within six months.

Considering China Telecom’s 175 million mobile phone subscribers, it’s not a particularly daunting task.

But will users buy into the “free service” once the initial frenzy is over?

WeChat’s advantage

“WeChat still has a lot of advantage over possible rivals due to its good user experience, and it could keep up its leading edge by including more services and stepped-up collaboration with external services and content providers,” iResearch analyst Lu Jingyu said.

WeChat includes a game center where users can see how their friends are doing on some of the mobile games offered by Tencent, but it has limited external service providers to keep providing an attractive user experience.

Most of my friends, who are already WeChat users, tell me that switching to a new chatting service is too much effort, especially since Yixin is basically offering nothing more than a similar service.

“Why would I download a separate application when almost everyone I want to contact already has a WeChat account?” asked Sherry Yao, a Shanghai office worker in her late 20s.

She said she’s not interested in the free China Telecom data packages because she uses WiFi connections most of the time and her existing data package is adequate.

Moreover, Yixin failed to deliver on its promise of free text messages to China Mobile and China Unicom users on the first day of its release. The company said that “bug” has now been fixed.

Apart from that, Yixin still needs improvement.

WeChat messages are sent between subscribers and there is a verification procedure to establish connection with each other.

But Yixin allows users to send text messages without the consent of other mobile phone user, which could be disturbing and cause harassment issues.

Industry people are somehow more optimistic about Yixin’s future.

“China Telecom obviously doesn’t want to be left behind, and its collaboration with NetEase, which has other online service such as online music streaming and gaming, provides imagination for future development,” said analyst Tian Siyu with research group Zero2IPO.

She estimated that more players would follow in China Telecom’s footsteps and enter the mobile instant messaging market.

“At the end of the day, even if Yixin has less than a 10 percent market share, it still spells great success for China Telecom and NetEase, given possible mobile value-added service charges it could bring to the joint venture,” commented Xin Haiguang, a veteran observer.

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