New York Times - Business

China, Not Silicon Valley, Is Cutting Edge in Mobile Tech

The future of online payments and engagements can be found at Liu Zheng’s noodle shop in central Beijing. Liu Xiu’e, 60, and her neighbor, Zhang Lixin, 55, read about the noodle shop on WeChat. Then they ordered and paid for their lunches and took and posted selfies of themselves outside the restaurant, all using the same app.

Liu Zheng, who is not related to Liu Xiu’e, said the automated ordering and payments meant he could cut down on wages for waiters. “In the future, we will only need one waiter to help in the restaurant and one to help with seating,” Mr. Liu said.

Industry leaders point to a number of areas where China jumped first. Before the online dating app Tinder, people in China used an app called Momo to flirt with nearby singles. Before the Amazon chief executive Jeff Bezos discussed using drones to deliver products, Chinese media reported that a local delivery company, S.F. Express, was experimenting with the idea. WeChat offered speedier in-app news articles long before Facebook, developed a walkie-talkie function before WhatsApp, and made major use of QR codes well before Snapchat.

Before Venmo became the app for millennials to transfer money in the United States, both young and old in China were investing, reimbursing each other, paying bills,and buying products from stores with smartphone-based digital wallets.

“Quite frankly, the trope that China copies the U.S. hasn’t been true for years, and in mobile it’s the opposite: The U.S. often copies China,” said Ben Thompson, the founder of the tech research firm Stratechery. “For the Facebook Messenger app, for example, the best way to understand their road map is to look at WeChat.”

A Facebook spokesman declined to comment. Tencent did not respond to requests for comment.

Executives from companies like Facebook and smaller rivals like Kik are trying to replicate what has emerged in China: dominant online platforms where users will spend much of their time. Much of that effort is focused on chat.

“The cool thing about chat is it becomes an operating system for your daily life,” Mr. Livingston said. “Going up to a vending machine, ordering food, getting a cab: Chat can power those interactions, and that’s what we’re seeing with WeChat.”

China still lags in important areas. Its most powerful, high-end servers and supercomputers often rely in part on American technology. Virtual-reality start-ups trail foreign counterparts, and Google has a jump on Baidu in driverless car technology. Many of China’s products also lack the polish of their American counterparts.

The biggest advantage for China’s tech industry, according to many analysts, is that it was able to fill a vacuum after the country essentially created much of its economy from scratch following the end of the Cultural Revolution, in 1976. Unlike in the United States, where banks and retailers already have strong holds on customers, China’s state-run lenders are inefficient, and retailers never expanded broadly enough to serve a fast-growing middle class.

Many Chinese also never bought a personal computer, meaning smartphones are the primary — and often first — computing device for the more than 600 million who have them in China.

“The U.S. was first to credit cards, and everyone there has a personal computer. But China, where everyone is on their phones all the time, is now ahead in mobile commerce and mobile payments by virtue of leapfrogging the PC and credit cards,” Mr. Thompson said.

Chinese companies also approach the internet in a different way. In the United States, tech firms emphasize simplicity in their apps. But in China, its three major internet companies — Alibaba, Baidu and the WeChat parent Tencent — compete to create a single app with as many functions as they can stuff into it.

On Alibaba’s Taobao shopping app, people can also buy groceries, buy credits for online games, scan coupons and find deals at stores nearby. Baidu’s mapping app lets users order an Uber, reserve a restaurant or hotel, order in food, buy movie tickets and find just about any type of store nearby.

Tencent has opened up WeChat to other companies, allowing them to create apps within WeChat. Ebaoyang — a start-up that enables people to order oil changes for their cars directly on smartphones — was at first almost totally reliant on WeChat to attract business. Gao Feng, one of Ebaoyang’s founders, said the company still relied on the app for 50 percent of its payments and 20 percent of new customers.

“We started from WeChat. So it was our main, original source for getting customers,” he said.

Between fees for its services and money it makes through online games, WeChat manages to generate $ 7 in revenue per user each year, according to Nomura. The app has roughly 700 million users, more than the total number of smartphone users in China, in part because some users are outside the country and in part because people have multiple accounts.

Much of that comes not from ads, as it might in the United States, but from spending on games, services and goods sold on the app. Those models may not translate from one market to the other, but the two can still borrow from each other, said Carmen Chang, a partner at the venture capital firm New Enterprise Associates.

“China was able to develop a lot of innovative business models, which arose in a different kind of economy,” said Ms. Chang, who spends time in both China and in Menlo Park, Calif. “Whether or not we admit it here in Silicon Valley, it’s had an impact on us and our thinking.”

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