Facebook will have ‘monetisation problem’ if it does not follow e-commerce model of WeChat, says China venture capitalist

William Bao Bean talks at Tech in Asia

William Bao Bean talks at Tech in Asia yesterday

A venture capitalist specialising in bringing foreign companies into China said at a conference in Singapore yesterday that Facebook will have a “monetisation problem” if it does not follow the e-commerce model championed by WeChat.

Talking at the Tech in Asia event in Singapore, William Bao Bean, Asia partner at investment firm SOS Ventures, told delegates that WeChat is significantly ahead of Facebook in how it makes money, particularly since the latter has made it too difficult to drive customer acquisition through content and has “killed virality”.

“WeChat – whether they’re good or bad – the bottom line is they are about 18 months ahead of Facebook,” he said. “Facebook is pretty old school. If you go on to Facebook and look around you cannot buy anything. You go on to WeChat and look around, you can buy everything,” he noted, referring to the advanced e-commerce features on WeChat that are absent on Facebook.

“Facebook is a media company. I totally agree with Martin Sorrell [WPP’s chief executive] on this point, at least. Facebook killed virality. But WeChat keep it open, they allow virality and the way they make money is through revenue share on transactions,” Bao Bean explained, adding that Facebook is likely to go down WeChat’s path towards commerce and “clone” its model.

“I think over time Facebook will have an issue, because if they keep charging everybody [brands] to share something as opposed to moving to a commerce model, where they make money on purchases, they will have a huge monetisation problem in the future,” he predicted.

“From what I understand of the Facebook roadmap it’s a giant WeChat clone. They will go there, eventually,” he added later in his talk.

During a candid presentation, Bao Bean, who was previously with SingTel Innov8 before moving on to SOSV, and who is the MD of two accelerator firms, Chinaccelerator and Mobile Only Accelerator (MOX), pressed home the virtues of e-commerce over advertising.

“In Facebook, there is a community, but you can’t do anything with it, they’re [fans] just sitting there. The key thing with WeChat is that you can drive them to download apps, but more importantly you can drive them to buy shit,” he said.

Bao Bean declared that his company had made 33 investments in the last 18 months in companies that drive people to communities through content, and then sell to them. None of them have websites, only three have apps but all started out on WeChat, he shared.

Of the companies he has invested in, he said that up to 4.8 per cent of every WeChat follower is buying on the platform every month. “That is a lot more powerful than paying for clicks. It’s a little harder to learn how to do, but it’s a lot more powerful,” he said.

Video on Neonan

Video on Neonan

One of the companies Bao Bean has bought into is Neonan, which means bad-ass in Chinese. It’s a site designed for men who want to improve themselves and find a partner, and features content such as exercise videos with scantily clad people working out by a swimming pool and dating tips.

The site started, Bao Bean explained, by the founders downloading 70 videos a day from YouTube and then uploading them to Chinese video sharing site QQ before they started to produce their own content. Neonan generates 1.8 billion views a year with no spend on marketing.

During a Q&A after his presentation, he was asked for his views on LINE, the Japan-originated app that like WeChat has e-commerce capabilities.

“The WeChat and LINE approach will work better over time than the Facebook approach, because there’s more money in selling stuff than there is in advertising to people to sell stuff,” he said.

Bao Bean’s comments come the week after Facebook announced a new policy to enable branded content on the platform.


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