I previously made the claim that it is unlikely that we will see a true super app emerge in the West. In general, I still stand by that claim.
Photo credit: Unsplash
When I was doing research on the super-app ambitions of US tech giants, one theme that emerged was that many of them seem to be fighting to become the super app in countries other than the US – particularly India. Amazon, Facebook, and Google all have active super app-like products in that country, and in other emerging markets as well, such as Brazil.
Facebook – along with many of its subsidiary properties – has the most public ambitions to become a super app.
On the
about page
of its website, The Facebook Company (yes, that’s what it calls itself now) breaks down its technologies/products:
Facebook app
Messenger
Oculus
Workplace
Portal
Novi
What’s absent from that list is F2 or Facebook Financial, which is now led by David Marcus, former CEO of PayPal, former head of Facebook Messenger, and co-creator of the group’s blockchain-based payments system Libra.
The Facebook Company has a few core properties that are primed to become super apps. In order, they are WhatsApp, Messenger, Facebook.com, and Instagram.
But if Facebook wants any of its platforms to become a true super app, it must have payments as a core piece of infrastructure. Appointing a seasoned exec in Marcus and making payments into a company-wide initiative via Facebook Financial will allow it to have a powerful and unified payments experience across all of its applications.
When Facebook bought WhatsApp for US$19 billion in 2014 many were shocked, but Facebook knew exactly what it was doing.
By February 2020 WhatsApp had more than
2 billion users globally
and supported more than 50 million business app users. No other platform seems more primed to become a super app.
As an American using the messenger service, I had always thought of it as a glorified texting app with a “statuses” feature that no one uses. But in markets like India and Brazil, WhatsApp already has more super app-like functionalities and has even become
an integral part of national culture .
The messaging service’s biggest market is India where, as of July 2019 it had 400 million monthly active users – roughly 30% of the total population and about 70% of India’s 560 million internet users.
While WhatsApp has more global users than WeChat’s 1.2 billion users, it does not have the same stronghold in one country like WeChat has in China.
That said, India seems to be its target.
Ambitions in India
As far back as 2018 WhatsApp already had
a peer-to-peer payment functionality
for Indian users. Today, it’s running many financial pilots in the country.
Photo credit:
TechCrunch
The app also offers
WhatsApp Business , which is reminiscent of WeChat’s mini-program precursor Official Accounts. Launched in January 2018 the service had
5 million users
about a year later, and WhatsApp claims that by July 2020 the number of businesses using the service had grown to
50 million
enterprises – and
15 million
of those were in India.
Photo credit: WhatsApp
In absolute numbers, India is the world’s second-most unbanked country, with 191 million adults without a bank account. As a percentage of its total population, though, that’s only about 11%, which is not too high. The growth in the country’s banked population is in part due to the government’s drastic measures to decrease India’s reliance on cash via the controversial process of
demonetization .
To gain an even greater foothold in the country, Facebook invested US$5.7 billion into India’s Jio Platforms, the digital services and telco subsidiary of the nation’s largest company Reliance Industries. Prior to WhatsApp taking off in the country, Jio had its
own super-app ambitions .
Facebook owes a debt of gratitude to Jio, as many of Facebook’s India-based users are able to access Facebook and WhatsApp because of the wireless network that the firm has built.
The two companies are now working to collaborate on new offerings. I’m sure we will see Jio selling items via stores built on top of WhatsApp soon.
A push into Brazil
WhatsApp is also very active in running pilots to build out its payment offerings in Brazil, likely with bigger ambitions of building a super app for the country.
In many ways, WhatsApp’s story is one of breaking the monopoly of exploitative telco networks that have been overcharging users for SMS.
“The cost of SMS in [Brazil] was as much as 55x more than in North America and far too expensive for most residents,” according to the
Harvard Business Review
. “So when the messaging service WhatsApp entered the market in 2009 allowing users to send messages to anyone for free and regardless of their mobile carrier, people gravitated toward the platform.”
Facebook has also enabled peer-to-peer transactions in Brazil by “building on Facebook Pay, which provides a secure and consistent way to make payments across our apps,”
said Mark Zuckerberg .
It allows users to make payments to small WhatsApp business accounts as well within the WhatsApp chat interface (photo on the right below).
Photo credit:
Mark Zuckerberg
A boon for businesses
In WhatsApp-dominated markets like India and Brazil, there are standalone businesses building their companies on top of the messaging service.
Yalochat helps brands better connect with their users by building customer relationship management, marketing, customer service, sales, and conversation tools on top of popular messaging apps. Its raised US$23 million from venture capitalists such as Sierra Ventures and B Capital Group, and currently operates in Latin America and India, with plans to expand soon into Southeast Asia – all WhatsApp-dominated markets.
Many other companies like Yalochat have raised money from well-known VCs – a point that underscores how they are not just offering products but are also trying to build venture-scale companies largely on top of WhatsApp.
This is very much like how companies in China build businesses using WeChat distribution.
As WhatsApp continues to build more payment features into the app, these businesses have the potential to get stronger. At the same time, though, as more business-focused features get added to the platform, the companies run some risk of being cannibalized by native WhatsApp features.
The strong case for WhatsApp as a super app is that it looks a lot like WeChat: It started as a messaging app that gained ubiquity across big markets and has added payments and commerce functionality on top of that.
The pessimistic case for it, though, is that it’s a part of Facebook, and it may not be able to chart its own course the way WeChat did.
What lies ahead
Here’s an important question: Who is the product leader that is really calling the shots at WhatsApp, now that both of its original founders are out?
Although WeChat started within Tencent, its founder Allen Zhang is still a driving force in the app’s product development; his identity is stamped onto the product. As WhatsApp needs to make critical choices down the road, who will make those calls? Who is deciding the trade-off between crowding the feed with advertisements vs. continuing to push off monetization?
On top of these questions, Facebook’s culture is also not entirely friendly to third parties and is heavily reliant on advertising. WeChat’s openness and ability to allow anyone to build on top of it are essential to its success. Facebook would need to be okay with winning alongside other companies that specialize in functions such as ride-sharing and other verticals.
For example, I’m excited to see if WhatsApp will allow a Gojek integration that can have users hailing a ride from the app. This is an additional argument in favor of Facebook’s investment in Gojek.
One of the aspects that makes achieving super app dominance harder in the West – one that Tencent used to its advantage in China – is the ability of an app to invest and acquire meaningful ownership stakes in companies that it will support as Tier 1 partners.
All of the companies powering the featured services within WeChat, for instance, have Tencent as one of their largest shareholders:
Didi: 20%
JD.com: 17%
Moguejie: 17.2% (at the time of Mogu’s 2018 IPO)
Pinduoduo: 18.5% (at the time of Pinduoduo’s IPO)
The Chinese conglomerate has also poured investments into the following:
Zhuan Zhuan: In 2017 Tencent led a US$200 million round for the company.
Ke.com: Tencent led a US$800 million round for the firm in 2019.
For an aspiring super app like Facebook or WhatsApp, these same opportunities are not available to them in the US.
Facebook likely did not have the opportunity to invest in a ride-hailing company like Uber or Lyft, or an online marketplace like Wish. Also, given the maturity of the US market, some of the companies Facebook might have wanted to partner with (e.g., Netflix, Amazon, eBay) are older than the firm itself, so the opportunity certainly was not available.
But when you look at a country like Indonesia, Facebook’s Gojek investment makes a lot of sense, and it’s no longer farfetched to imagine WhatsApp enabling users to call a Gojek ride through a mini-program-like feature. Keep an eye out for more investments from Facebook into markets like Indonesia.
Something that is important to bring up is
the list
of countries with the highest number of internet users.
Photo credit:
Internet World Statistics
Since Facebook/WhatsApp has no real entry point into China, India and Brazil make a lot of sense for the company.
Messenger
As far back as 2015 Messenger had attempted to add super-app functionalities. At the time, it partnered with Uber to allow people to request an Uber ride directly from the Messenger app.
I don’t think that feature still exists, but it presents an image of what Messenger as a super app could look like.
In January 2019 Facebook Messenger was still the top messaging app in 57 countries, including the US, Canada, Australia, Poland, Norway, and some North African countries such as Egypt, Nigeria, and Libya.
That said, even though Facebook Messenger is still growing, it is losing its number one position in many markets – and in
all cases
to WhatsApp.
Photo credit:
SimilarWeb
If The Facebook Company had wanted to take a bet on building a super app for the US, it seems like Messenger would have been the horse to bet on. Product-wise, it would look a lot like what I had laid out for WhatsApp, albeit catering to different markets. As an overall global strategy, though, WhatsApp seems to be the better investment.
Facebook.com
The media has not been shy about covering Zuckerberg’s ambitions to turn Facebook.com into a WeChat-style super app
And looking at the current Facebook mobile experience, it appears to mimic some of the super app’s ideals in terms of offering many experiences within one app.
But unlike super apps such as WeChat, every single one of the Facebook app’s features is owned and operated by Facebook.
The platform’s dating product is built by Facebook, not a result of a partnership with Tinder. Its Videos on Watch feature is also built by Facebook, not a tie-up with YouTube or Twitch.
And I think that’s the challenge for the app. While its in-house strategy has worked for it so far, turning Facebook into the US$700 billion juggernaut that it is, it’s antithetical to building a super app.
On the flip side, one of my favorite articles that also made me feel most optimistic about Facebook’s potential as a super app comes from Bangladesh. It covers the country’s
F-commerce
or Facebook commerce industry of individuals selling goods via Facebook groups and livestreams.
An entire industry has been built around these sellers. Logistics player Paperfly, for example, “has already partnered with over 3500 Facebook sellers and delivers to all 64 administrative districts of Bangladesh,” the article states.
In general, successful companies tend to be more bottom-up than top-down. If I were on Facebook’s team, I would be laser-focused on markets such as Bangladesh where “many consider ‘being on the internet’ as simply having registered on Facebook,” as the article puts it.
For a Western audience, understanding the case for Instagram as a super app feels clearer.
Instagram built a popular, high open-rate app that is used by over a billion people, with 130 million users in the US. It’s also popular in India (100 million users), Brazil (91 million), Indonesia (73 million), and Russia (51 million).
Besides its main function as a photo-sharing application, Instagram DM, its native message service, is also extremely popular, especially among younger generations that use it as a primary communication channel with friends.
What really convinced me of Instagram’s full potential, though, was seeing it double down on in-app shopping. It’s an example of how the app could adopt some of the functionalities that WeChat has and WhatsApp is building.
By using Instagram’s new shopping tools, users can purchase directly by clicking on a photo, adding products to their cart, and then checking out – an incredibly smooth flow. This also widens the market for brick-and-mortar businesses, which previously would have been limited to foot traffic; just by posting beautiful photos, they can attract shoppers from all over.
If Instagram added native QR code payments in the app, a user could even go into a physical store and pay directly using the platform. That might look a bit odd at first glance, but if a shopper’s entire association with the store is through Instagram, it’s actually not that strange.
I’m neither a big Instagram user nor do I like shopping. In the process of playing around with Instagram shopping for the purpose of this article, I became more skeptical of the feature, first because it’s called Facebook Shops. I’d be more optimistic about the future of Instagram if Facebook would let it maintain the ethos that made it successful in the first place.
I had an excellent experience browsing the page of a Tier 1 brand. In one of Zara’s recent posts, the company had tagged all the products featured on the photo, which can be easily added to the cart and checked out.
But when I went to a brand that I actually shop at, the experience was suboptimal.
I was not able to add Bearbottom’s clothing items directly to the Instagram shopping cart. Instead, I was redirected to the company’s website to check out and make payment. It’s possible that this is Bearbottom’s fault and that they haven’t set up the right account yet.
The worst part, from the brand’s perspective, is that underneath the pair of Bearbottom shorts that I clicked on were “similar items” from other retailers. The last thing a brand trying to sell on Instagram wants to see is a knock-off or competing product getting advertised beside one of its own.
And this is one of the reasons to be bearish on the chances of Facebook-owned products becoming super apps. The group has a culture and product ethos around advertising that could be antithetical to the other apps living on top of its platforms.
But for Instagram specifically, given how beautiful the feed can be, it seems like a prime app to connect to something like Uber Eats, for example, and easily allow users to order from a photo.
Closing thoughts
Super apps are like governments collecting sales tax.
In China, Didi won the ride-hailing market in part because of Tencent’s investment and native integration on WeChat. So even if Tencent takes a 10% cut of the Didi rides that get booked on WeChat, paying the super app tax is worth it. It’s a bit like trading profit margin for distribution.
I have focused a lot on WhatsApp because I believe it’s the one most primed to become a super app. But given Facebook’s resources, all of its properties have the ability to make the transition.
However, I believe that part of Facebook’s cultural ethos is opposed to what has made other super apps successful – namely, eschewing advertising and welcoming deep integrations with third parties.
This is an edited and condensed version of an article that was first published on
East Meets West .
