Chinese tech giant Tencent (NASDAQOTH:TCEHY) owns WeChat, the country's most popular mobile messaging app, and its video game portfolio makes it the biggest game publisher in the world. That's why it wasn't surprising when Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, which left mainland China after clashing with regulators in 2010, recently launched its first "mini program" -- a game -- for WeChat.
WeChat's mini programs are lightweight apps that run within its core messaging app. These apps expand WeChat as a software platform, and enable it to generate app revenues without owning a major mobile OS like iOS or Android. Over a million mini programs have been launched for WeChat so far, and 500 million users interact with mini programs at least once a month. Those numbers should continue growing alongside its monthly active users, which rose 11% annually to 1.04 billion last quarter.
Google's first WeChat mini program is Guess My Sketch, a social Pictionary-like game where you're trying to guess what others are drawing. Google's game adds a unique angle: Each player gets an AI partner that tries to recognize the pictures and provide clues. This little program won't move the needle for Google, but it should tighten its budding relationship with Tencent, which could help it get back into the Chinese government's good graces.
Tracking Google's moves in China
Google never completely left China, even though its search engine and Play Store remain blocked in mainland China. After shutting down its mainland search engine in 2010, Google pivoted its resources to its Hong Kong search engine, which was better insulated from mainland regulations.
Google also retained a smaller advertising business in China through offices in Beijing, Shanghai, and Shenzhen. The company still employs hundreds of workers across China to work on its international operations, and uses its new Shenzhen office as a hub for its fledgling hardware operations. To strengthen that business, Google acquired most of Taiwanese company HTC's smartphone unit last year, which gave it 2,000 new employees in the Greater China area. Google also opened an AI research lab in Beijing last December in a bid to keep pace with Baidu, Alibaba, and Tencent's AI efforts.
Last March, Google launched its Translate app in China in a rare first-party app launch for iOS and Android. Standalone apps might pave the way to Google Play's return to China, but the move could be tough, since the Chinese Android market is fragmented among OEM-owned app stores like Xiaomi Market and Huawei's AppGallery.
This year Google focused on tighter ties with Tencent. In January, it signed a patent cross-licensing deal with Tencent to share "a broad range of products and technologies," then co-invested in Chinese biotech start-up XtalPi with Tencent and Sequoia China. In June, Google invested $550 million in Tencent's main e-commerce partner, JD.com, to expand its e-commerce presence in Asia.
Meanwhile, Google continued expanding into the Chinese market by introducing its ARCore augmented reality development kit for Chinese developers in May, then launched Files Go, a file management app, on third-party Android stores later that month. Launching new mini programs for WeChat seems like a logical extension of these baby steps.
But will these efforts pay off?
Google's steps back into China are encouraging, but they're fragmented and lack the focus of Apple's decision to simply launch a censored Chinese App Store for the country's tightly regulated market. Google also faces a long uphill battle to become relevant again in China; Baidu now controls the search market, Tencent controls the social market, and the app store market is split between Android OEMs and Apple.
Google likely partnered with Tencent because Apple considers WeChat's mini programs to be a threat to its App Store, since it can't receive a cut of those revenues. Apple even manged to bar Tencent from using the word "app" to describe its in-app programs -- that's why they're called mini programs.
Unless Google relaunches its search engine and Google Play in China, its latest moves will be considered scattered experiments instead of a meaningful push against Baidu and Apple. For now, Google's partnerships with Tencent should benefit the latter more, since they could widen its moat against ecosystem rivals like Alibaba and Baidu.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Apple, Baidu, JD.com, and Tencent Holdings. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Baidu, JD.com, and Tencent Holdings. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.