LINE 101

TC just reported that LINE’s revenues have doubled YoY to $192m USD in Q3 2014. And just like that, LINE is back in the news again.

Since I seem to repeat the same answers to the same questions about LINE over and over, here is what I wrote in 2013 for TNW. The piece is about messaging apps but I  go over all the basics of LINE. From history to adoption, features, business model, etc., this should cover any and all questions so it’s really, really, really long.

Enjoy — and feel free to ask any questions in the comments.


 

Line’s rise in Japan

Take the Line story, for example. Line, wasn’t an overnight success and there is good reason for that. Line’s biggest marketshare is in Japan. Japan’s smartphone market really began growing in 2011 — some four years after the US — and analysts have found a near-150 percent rise in smartphone adoption between 2011 and 2013.

Of the 127 million people in Japan, smartphone ownership finally passed 50 million users in August, but things are developing rapidly. Japan overtook the US as the biggest spenders on apps only this week, and the market is potentially hugely lucrative for makers of popular apps.

idc japan 520x279 Silicon Valley, you are tardy to the messaging app party

This market shift also affected Japan’s text-based communication.

Text-based communication in Japan is very different from the US and other parts of the world. Japanese telecoms have advanced emailing systems, where carrier-issued email addresses are attached to every mobile number. The email system functionally operates like SMS: simple, free and unlimited. SMS in Japan is charged per text, so before mass market smartphone adoption, text communication was done by keitai meru (cell phone mail).

With the rise of smartphones, apps quickly became popular. As users got used to beautiful, gesture-based UIs, text-based cell phone email no longer fulfilled their needs. That’s when Line started gaining serious traction. People go where their friends are and Line happened to be in the right place, at the right time.

Line changed Japanese mobile communication.

And it’s easy to see why people quickly adopted Line. An Internet connection gives users free unlimited voice calls, unlimited free messaging, unlimited instant photo sharing, group chats and video communication. The interface is cute and Line is very easy to use, but, most importantly, it offered a solution to the ‘pay for all and everything’ Japanese telecom model — and Line disrupted the Japanese mobile industry.

line 300m 730x588 Silicon Valley, you are tardy to the messaging app party

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Internet Power Balance Shift to Asia

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The WSJ had a nice piece breaking down the mega internet companies of the world — of course US leads the pack but Asian companies aren’t doing so shabby either. China is of course leading the ‘Asia’ pack due to sheer population volume. Seriously, file that under no shit Sherlock.

But there were some fun factoids:

  • 45% of the world’s nearly 3 billion internet users are in Asia
  • WeChat (owned by Tencent) has about 440m users
  • Tencent’s profit margin in the second quarter was 32%, compared with 27% at Facebook and 21% at Google.
  • Tencent’s stock-market value is $148 billion, compared with Facebook’s $194 billion.
  • LINE (Japanese messaging app) had revenue of $323 million, 16 times the estimated revenue of WhatsApp.

…separately, it’s really funny how ‘tech journalists’ don’t seem to understand the products they are writing about. This particular author, said WeChat is WhatsApp’s rival. No. No. No. I can not say this enough times: they are two very different products. WhatsApp is a communication utility – a tool. WeChat is a full fledged platform, an ecosystem.

The author also calls LINE stickers ‘cutesy emoticons’ — which further highlights the lack of understanding of mobile behavior in Asia even after NYT wrote about it!! (Pretty embarrassing).

Oh well. I guess that’s why there is a need for someone like me or Jon Russell of TNW and a dedicated publication like TIA to pipe on about this region.

Mobile Money

Leaving the US has opened my eyes to a lot of things, especially how the world outside of America operates. Because the iPhone isn’t as adopted in other parts of the world, there are many solutions to make communication between iOS and Android possible — which is why I became so fascinated with chat apps.

Then, I fell into the chat app rabbit hole and became obsessed with learning, using and following the big players outside of the US: WeChat, LINE, Kakao and WhatsApp. Which lead to learning about the different use cases and the reason I keep piping on about how SnapChat, WhatsApp, FB Messenger are not like WeChat, Line and Kakao. I also argue WeChat is in a league of its own. (If you’re interested, my messaging app series is here). Living in Asia, it’s easier to appreciate various ways people and cultures use their mobiles as I am an actual user vs. reading about use cases.

When I visited various Southeast Asian countries with Dave McClure’s Geeks on a Plane tour, my mind was blown. In countries still considered emerging nations ex: Malaysia, Thailand, Philippines, Indonesia, the way phones are used are so different. Actually, everything is different. Most mobiles are pre-paid. Mobile internet connection is mostly 3G and the majority of the population still uses flip phones. I even saw old Nokia phones with the green, pixelated screens. Remember those? I was really good at Snake. Reading and researching about mobile, I was aware of the numbers but to actually see how low smartphone penetration actually was, is a moment I will never forget.

The biggest opportunity I see in emerging nations is how technology is solving dual objectives: social problems and monetization. And the biggest opportunity I see is in mobile payments. I’ve said it once and will probably keep repeating, that because WhatsApp has capabilities on flip phones and older phones, their biggest missed opportunity is moving from a communication utility into a full fledged platform.

I really wish I knew more about payments or was passionate about the topic enough to jump into creating a product. But I am, super excited to see who will be the first to solve across SE Asia.

qz really sums it up best:

At the end of April, nine mobile operators with 582 mobile connections across 48 countries in Africa and the Middle East committed to make their mobile money offerings work across their networks. With interoperability comes greater cohesion and opportunity for new services.

And the kicker:

If it’s done right, it could form the foundation of a whole new global financial-services industry. And the US and Europe will be far behind.

Read the entire post here

SEAsia Messaging App Share

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LOTS of opportunities in SEAsia.
To recap on LINE:

  • 60% of LINE’s revenue came from the mobile games
  • LINE was the world’s top app publisher by monthly revenue
  • LINE Posts $143 Million In Revenue, Up 123% Year-Over-Year
  • $1.5mm USD revenue for user generated sticker marketplace

Granted, we may not see the same sorts of revenues from SEAsian countries, as most are developing nations and notorious for not spending (ex Path is Indonesia’s largest market, yet they never boast revenues or lack thereof).

The next few years will be fun to watch as chat apps mature and become more dominant.
(Sources 1,2,3, image via here)

 

43.3% of Japanese use LINE Professionally, 29.6% use Facebook

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Wow — I knew messaging apps are huge in Japan but it still astounds me to see numbers.
43.3% of those in the sample pool use LINE professionally.
29.6% use Facebook as a professional communication tool.

Skype is 12%
KakaoTalk 6.1%
Followed by LinkedIn, Viber, communicator.

I guess as Hiroko Tabuchi of the NYT reported: “It’s just easier when a bear says it.”
*above stats provided by MMD — a Mobile Marketing Data Labo, a research company in Japan.

Popular Communication & Messaging Apps by Country

I spent the past week reading forecasts and reports from Goldman Sachs, McKinsey, Morgan Stanley, Deutsche, etc., etc.

It sounds a bit boring but really not. It was actually fun to read, consume, compare and contrast the different reports.

Quick takeaways:

Deutsche Engagement

Deutsche’s chart of messaging apps used in Brazil, Russia, China, South Korea, Japan and the US.

culture and distro

 

Cross referenced with AppAnnie’s spend by country chart tells us:

  • S. Korea consumes and spends on content. Kakao Talk’s success is likely due to that ecosystem.
  • Japan leads in gaming, explaining the success of gaming companies as Capcom, DeNA, Gree, et al., and the reason the Japanese spend the most in both Google Play and iOS stores. Also explains success of LINE
  • US has wide range of content spend but the US is a distinct market from the rest of the world with different economical factors.

This chart also from App Annie interests me more, as it shows spend vs device:

Device per spend

I agree with Goldman Sachs, stating BRICs (Brazil, Russia, India and China) are 3-5 years away from global scaling and spending.

South Korea, with the highest spend and technological advancements, is like China where the ecosystems are so tightly intertwined it’s a tough market to penetrate. Fun to watch, but just like China, certain models and strategies cannot be emulated because of the reliance on proprietary strong holds.

For people looking to enter markets, Japan, UK and US are the likely bets. Or at least if I were a VC, that’s where I’d be placing bets.

Still digesting but as my thoughts parse, I will be sharing.

WeChat 101- Quit Comparing WeChat and WhatsApp

WhatsApp, Viber, Telegram and Snapchat are not like WeChat, LINE and KakaoTalk.

I’ve written about LINE and KakaoTalk but now it’s time to intro the last player – WeChat. WeChat is not – I repeat NOT anything like WhatsApp or Viber.

Aside from multi-media communication capabilities: photos, video, walkie-talkie and broadcast features, in August of 2013, WeChat completely overhauled their product with v5.1 to add a bunch of new features and functions.

They keep differentiating themselves from the rest of the chat apps and this is why:

  • in-app payments
  • P2P (peer to peer) and O2O (offline-online) core strategy aside from games <– HUGE
  • multiple monetization streams

Payments

WeChat-2

WeChat Payments connects bank card to WeChat account so users can make payments in-app.
Users can make transactions happen through 1. payments to WeChat authorized partner retailers 2. P2P (peer to peer) or in plain English other WeChat users – example: users can send one person a specified amount, or send money to a group and divide the lump sum among a group of friends.  If I had a penny for every time I’ve had issues with group payments where one person pays too much, too little I’d have about four extra iPhones sitting around. Or think about that one person who never has cash, etc., etc. WeChat group payments is the perfect resolution for group events / activities.

O2O / P2P Commerce

WeChat also partnered with sites and services – whether through acquisitions or buying a stake in the company – doing flash sales or becoming the preferred payment partner. To date, DianPing – China’s answer to Yelp, with a Groupon type group buying feature DianPing also offers coupons and discounts and users can even order food for delivery – is one of the most notable.

The other is Didi Dache – China’s Uber – where users can order a taxi and make payments, all in-app. Since forming the partnership in Jan., WeChat reports

  • 21mm cab rides have been booked via WeChat
  • 700k daily bookings via WeChat
  • Didi Dache and WeChat also pay cab drivers bonuses when the drivers use their services vs a competitor

WeChat also aggressively positions themselves as the entry point for global brands who want to reach China’s youths. Most recently, Vivienne Tam and WeChat collaborated to bring NYFW (NY Fashion Week) to WeChat users.

They’ve also done campaigns with Mc Donald’s, Starbucks, Burberry, Pepsi and Maybelline – bottom line, they are making money becoming a payment solution and by advertising as well.

Another monetization channel through partnerships is content. WeChat and Chinese media outlets bring news and entertainment to users. However, instead of solely bringing content into the app like Flipboard or Facebook’s Paper, they have their media partners build proprietary micro-sites into WeChat with proprietary URLs ie: mp.weixin.qq/majorchinesenetwork and charge users subscription fees.

They’ve also ventured into streaming video, launching a standalone TV with CNTV (major Chinese tv network).

If you think that’s all, they are also China’s small business e/m-commerce solution (like Etsy or even Amazon).
Small business accounts are

  • free to create — fee is dependent on level of API customization and how much a business wants to integrate their products and services into WeChat
  • transactions are conducted inside WeChat — which leads to increased time spent inside app
  • bar-code scanner capabilities so people can scan a bar code in a store of something they see and shop for it online for example
  • built in loyalty cards and point card systems

Major brands and retailers to even a college student with a fruit stand can buy and sell on WeChat – that’s how simple it is.

WeChat states they have 300mm active users per month and YoY growth of 124% (note: these numbers are before the Red Envelope campaign that reportedly activated 20mm transactions within 9 days and announcement of all their partnerships).

WeChat is not fucking around.

I’m sure there are so many more features and functions, products and services I may be missing. This is information I gathered through English sources (FT, Economist, WSJ, Techcrunch, The Next Web, Tech in Asia and some random Chinese sites I ran through Google Translate) but even if I don’t know all the details, it’s pretty clear they are one step above the rest of the chat app herd.

One can argue their success is due to the uniqueness of the Chinese market and how the economy is intertwined by a select few and with the government, but strip away all that noise and look at WeChat as a product. They are still several steps ahead of the rest — even LINE, that I am a massive fan of.

2014 is going to be a year to closely watch Asia.