Every successful business has a “secret sauce”. That thing “that allows you to deliver the benefits your customers value with much greater effectiveness than any other competitor”, as Bill Aulet, in his book Disciplined Entrepreneurship, explains. Without a secret sauce, any entrepreneur will inevitably fail in a mass of competition.
In one specific chapter, Bill mentions a particular secret sauce (or core) that resonated with something I’ve been pondering on for a very long time now: the Network Effect.
The Network Effect is where a company achieve so much critical mass in the marketplace that it does not makes sense for potential customers to use another product. The value of the network to any individual on that network is exponentially related to the number of users on the network. The company with the most users is the most valuable; hence it is logical for new users to choose that network.
And that’s one of the reasons why Facebook is so successful and has an almost unassailable position in the marketplace.
Whatsapp benefit from this core as well. They have amassed more than 500+ million users and, by understanding their target market, they were able to stay focused to create a simple, streamlined, ad-free product.
It allowed them to become extremely successful in markets such as the USA, Europe and South Africa.
Which brings me to the interesting part of this post.
Up until about a year ago, WhatsApp was the strongest contender in the texting space in SA. But then all of a sudden, WeChat started to pop up all over the country, on busses, TV, radio and magazines. More than 13 years after Naspers’ 46.5% acquisition in 2001 in China’s Tencent (the holding company for WeChat), they started to push it into the market quite aggressively.
Part of their acquisition strategy was to target brands and celebrities as well. This is not only a great strategy to get people to download the app (CliffCentral.com has gained more than 80 000 followers on WeChat since it’s launch), but it also helps later adopters to download an application where their friends already are.
But would that be enough to help WeChat gain a lead on WhatsApp?
I don’t know, but if we look at the network effect, Whatsapp has achieved so much critical mass in South Africa that it does not makes sense for potential customers to use another product such as WeChat.
“But WeChat has discounts, social pages, celebrities, exclusive offers, stickers and embedded apps”, you say…
True story, yes, but the value of Whatsapp does not lie in it’s features (or lack of it) but is exponentially related to the number of users on it. So, features cant be a value proposition. Especially not in a Western market. This works very well for Eastern countries like China where a product’s value comes from the amount of features it has (think Lingscars.com.)
This would make it nearly impossible for any competitor, including WeChat, to gain a lead on Whatsapp in South Africa.
I might be completely wrong about this, but I think the battle between WhatsApp and WeChat in South Africa will become even more fierce. Naspers will continue to market WeChat very aggressively in South Africa and maybe even establish a very appealing network for brands to communicate with their fans in fresh, new ways, but I doubt that WeChat will sail past WhatsApp as the preferred friend to friend chat application.
Time will tell and perhaps even make a great case study. Let’s see how it plays out…