Line sticks to the global shadows despite splashy IPO

Published: November 9, 2016
Line reckons there is plenty of room to grow closer to home. PHOTO: LINE

Line reckons there is plenty of room to grow closer to home. PHOTO: LINE

LISBON: It staged one of the year’s biggest IPOs but messaging app Line, while a huge draw among teens in Asia, says it has no big ambitions to take on Western giants such as Facebook on their home turf.

The Japan-based company known for its popular cartoon “stickers” — a virtual communication tool for users too busy to write a text — instead means to focus on taking messaging to the next stage in its core Asian markets of Japan, Indonesia, Taiwan and Thailand.

“Our goal at Line is for the app to become the gateway to access all online services,” chief executive Takeshi Idezawa told AFP in an interview at the annual Web Summit in Lisbon.

Line’s service lets users make free calls, send instant messages and post photos or short videos, along with a host of other paid services.

It combines attributes from Facebook, Skype and WhatsApp with games and a mobile payment service also on offer.

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The company, which grew out of Japan’s 2011 quake-tsunami disaster and is owned by a South Korean Internet provider, staged a $1.3 billion initial public offering in July with a dual listing in New York and Tokyo that it said would help its international reach.

That was met with some scepticism by analysts at the time who wondered how effective Line’s lineup of products would prove beyond Asia, and Idezawa agreed it was hard to crack Western markets where Facebook-owned WhatsApp or Messenger are already the leader.

“A chat app has a very strong network effect (across the business), so we are focussing on the four Asian countries,” he said. “Asia is going to see very big economic growth and it is also a market where American companies are not finding it so easy to enter.”

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Line reckons there is plenty of room to grow closer to home. Japan, despite pioneering advanced handsets in the pre-iPhone 1990s, still only has 60 per cent market penetration for smartphones while in Indonesia the figure is less than half.

And the company believes it can extract much more from its 220 million “active monthly users”, as WeChat is doing in China.

Idezawa aims to make the basic app a “one-stop shop” offering multiple services such as games, music and payment services built on a chatbot that, exploiting artificial intelligence, can guide users’ needs.

“If users don’t see a benefit in staying online, they won’t stay, and that’s where we have to be creative to get users to stay.”

The app can already connect to a smart fridge and tell you if your beer supply is running short. But Idezawa downplayed security concerns surrounding devices plugged into the “internet of things”.

“Our security level is high,” he insisted, touting Line’s end-to-end encryption as rivalling that offered by WhatsApp.

In the first nine months of 2016, the company’s revenues increased year-on-year by 17 per cent to 103 billion yen and net profit came to 5.3 billion yen, against a net loss a year before.

It plans to increase the revenue share for advertising from 40 per cent now; among the rest, 30 per cent comes from games and 20 per cent from the stickers.

The stickers, a kind of animated language analogous to emoticons which users can buy individually or in sets, have proved hugely popular in Japan. The company is also experimenting with locally designed ones to entice customers in fledgling markets such as France.

Branded sponsorship of the stickers combines advertising with Line’s most emblematic feature. Idezawa pulled out his phone to display cutesy animal images sent to millions of Japanese users — one by e-commerce company Rakuten and another from Yahoo Japan.

“The general view of us is that we’re very strong at monetisation,” he said. “Other chat apps haven’t succeeded so much at that.”

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