Dan Grover, a product manager who worked on WeChat, writes about Chinese mobile app design, chatbots, and app development.
HN links his Chinese mobile UI series and his post arguing bots won't replace apps, which a commenter praises as excellent.
I agree that a good portion of the valuation must have been largely driven by fear and their potential to destroy that much value rather than create it. The factor that both challenges and supports your argument is how small their team was at acquisition (reportedly 32 engineers, 55 total). Charging $1 a year per user after the first year was bringing in revenue, and it wouldn't take much to be a "traditional business" ie. profitable. They also had zero-rated revenue-sharing deals with Reliance Telecom in India years ago as another potential source of revenue – I suspect relationships like this played a larger role in the acquisition than as they thought they would lay the groundwork for internet.org.
Your comment made me curious about what their actual revenues and costs were leading up to the sale. Putting (massive) stock-based compensation expenses aside it looks like their revenues and operating costs were actually pretty close[1]. That's not delving into potential revenue growth connected to payments and B2C interaction following the path which was already being laid out by wechat[2]-Facebook has decided to attempt this with messenger instead of whatsapp. I'm not saying that they would have quickly found enough revenue to justify a $20B valuation, but that it resembled a traditional business a lot more than many other social startups, and they were kept lean and probably better positioned to capitalize on growth than others.
[1]…
I wrote a post about this a while back:
http://dangrover.com/2010/05/29/indie-developers-and-crossing-the-app-store-chasm/
When I speak of the triumph of the app, I don't mean it as a synonym for
"program." That definition has become archaic.
I'm talking about "the app" as the unit of software in popular perception.
It is the monad. It is the atom. It is the cell. It is the brick.
Software is abstract. An app is concrete.
Apps obey basic laws. You can install or uninstall their functionality
completely. Apps are indivisible. Apps do not come with other apps, they
stand alone. Apps do not touch other apps' data without being allowed.
In short, the term "app" could best be defined, more broadly, as the
finest, most granular level of control over the computing experience that
most users can consistently and comfortably exercise.
What does China actually gain from this?
For the government the answer is clear: locally situated companies that they have total control over. WeChat will obviously never pull a Google style "encrypt all the things" - they'll happily help the state reduce the credit scores of political dissidents and anyone who is friends with them.
For politically connected cronies (e.g. WeChat owners), the answer is also clear.
But if you are just a Chinese citizen, what do you gain? Inferior substitutes for the Google/Facebook/etc infrastructure? Isolation from the rest of the world?
[1] This excellent article argues that WeChat's "conversational interface" is just a crude hack around app store restrictions. http://dangrover.com/blog/2016/04/20/bots-wont-replace-apps.html
Yes! More along these lines:
https://usv.com/post/an-idea-about-texting
https://www.ouvre-boite.com/messaging/
https://medium.com/@chrismessina/conversational-commerce-92e0bccfc3ff
http://blog.dilbert.com/post/109389515411/your-phone-interface-is-a-legacy-train-wreck
http://dangrover.com/blog/2014/12/01/chinese-mobile-app-ui-trends.html#chatasui
http://www.nngroup.com/articles/anti-mac-interface/
A text based or "messaging" UI is often simpler and more effective than fumbling with some complicated direct manipulation UI.
You're assuming that typing/talking to a bot is the easiest way to get things done. That's simply not true. We have custom UIs to interface with different domains because different domains work better/more efficiently with different UIs.
The following post has an analysis on this, with many great examples in the real world today
http://dangrover.com/blog/2016/04/20/bots-wont-replace-apps.html
Pretty sure OP meant this article - read it as well, thought it was very good:
http://dangrover.com/blog/2014/12/01/chinese-mobile-app-ui-trends.html
The Chinese market has a lot of beautiful apps (as a designer) - they're a little different from our North American apps, there are definitely a lot of lessons we could crib from them though.