Caixin
Mar 13, 2019 07:26 PM
BUSINESS & TECH

Apple, WeChat Tussle Over Mini Programs

WeChat's headquarters in Haizhu district, Guangzhou on Sept. 12, 2017. Photo: VCG
WeChat's headquarters in Haizhu district, Guangzhou on Sept. 12, 2017. Photo: VCG

* WeChat mini programs are bare-bones applications that can run instantly on the platform. The app’s 1.1 billion monthly active users have over 1 million they can choose to use.

* Currently, iPhone users can’t conduct any in-app purchases through the mini programs because WeChat has deactivated the function while it negotiates with Apple

(Beijing) — WeChat — a messaging, social media and online payment app that most Chinese can’t live without — is locked in a tussle with Apple Inc. over the app’s popular mini programs, which turned 2 years old in January.

Industry watchers told Caixin that Tencent Holdings Ltd., the tech giant that owns WeChat, has been trying to downplay the lightning-fast growth in mini programs over the last two years because of the intricacies of WeChat and Apple’s billing agreement for in-app purchases (IAPs). 

IAPs are the virtual goods and services that users can buy inside mobile applications, and Apple receives a cut when a user subscribes to a video streaming service or buys a sweet skin for his or her online game avatar, for instance. 

Launched in January 2017, WeChat’s mini programs are bare-bones applications that can run instantly on WeChat’s interface. For users, convenience is a big part of the mini programs’ appeal.

For example, the ride-hailing service Didi Chuxing — the Uber of China — has a mini program. It allows users to book a ride without leaving WeChat, going to the app store on their phones and then waiting for the Didi app to download. The Didi mini-program runs immediately within WeChat on any operating system.

Despite their convenience, mini programs pose a problem for Apple, which takes 30% of any IAP transacted via apps on its operating system, iOS. 

The problem is that iPhone users can’t conduct any IAPs through mini programs because WeChat has deactivated the function while it has not reached an agreement with Apple over billing function. The negotiations are currently in a stalemate.

For WeChat, mini programs could serve as its next big growth driver now that it has gotten its app onto most phones in China. (It has 1.1 billion monthly active users, while China has some 1.4 billion people). For Apple, mini programs look at a lot like a move to cut it out of a crucial source of income.

For his part, Du Jiahui, WeChat executive for open platforms, denied that their dispute was about revenue sharing, but rather a disagreement about “what mini programs are.”

“Android users spend money while iOS users spend time on our mini programs. We are always thinking of ways to help developers monetize our services,” Du said.

At stake in this conflict are the tens of billions of dollars that Apple users now spend on apps and IAPs. App Store users shelled out an estimated $46.6 billion on in-app purchases, subscriptions and premium apps in 2018, according to app intelligence firm Sensor Tower.

As of July, WeChat had more than 1 million mini programs, according to the most recent official data released by Tencent. In comparison, the App Store had over 2 million apps available as of May, according to industry tracker App Annie.

“The accelerating user growth of mini programs has gone beyond Apple’s expectations … it’s has been caught off-guard,” a source close to the negotiations told Caixin.

Of the estimated $71.3 billion that all mobile phone users spent on apps and games in 2018, it is notable that money spent on games made up the biggest share. Mobile gamers spent $54.7 billion in 2018, up 15.2% from the previous year, according to Sensor Tower.

Considering that China is the world’s largest games market, surpassing the U.S. and Japan in terms of revenue in 2016, mobile gaming will be a key in segment in the battle over in-app purchase revenue.

WeChat's “mini games” through mini programs already boast more than 400 million monthly active users.

During last year Lunar New Year holiday, the mini game Jump Jump, in which users has to manipulate a block to jump it onto other blocks at differing distances, attracted hundreds of millions of players in a few days after becoming available on WeChat’s homepage.

Despite this, an industry watcher said mini programs don’t pose an imminent threat to Apple.

“Users’ habits differ for Android and iOS, and some still prefer the traditional ways of downloading apps,” said Sun Yanbiao, head of smartphone tracking at Mobile No.1 Research Institute. Even if some users want to do away with many apps on their mobile devices, certain functions can only be offered on a full-scale app, he said.

Tang Ziyi and Isabelle Li contributed to the report.

Contact reporter Jason Tan (jasontan@caixin.com)

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