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

P1-BR340_AINTER_G_20140916174816

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.

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)

 

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.

Scale of Chat Apps in Asia

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I don’t think America still understands how big chat apps are in Asia and that’s ok. Like I keep saying, the US is email, iPhone (iMessage), SMS and Facebook Messenger reliant.

In Asia, it costs money to SMS. It costs money to make phone calls. Not as much as Europe maybe, but it still adds up. The US may be the only country where SMS and voice are flat fee, unlimited.

Because we are charged by telecos, chat apps have become a solution to avoid fees for something basic and ubiquitous as communication.

In Asia we are so chat app reliant, my personal and even work emails have been reduced by at least 85%. The only people who actually email are my American friends and colleagues.

Because I stopped relying on email as my main form of communication, I now see what a massive burden email is and how much of my time email dictated.

Chat apps don’t restrict texts with character counts, but because of the context of the core products (real-time interactions, short mail, instant messaging like features and functions), it cuts out a lot of unnecessary bullshit and people just get straight down to the point.

Granted, this is only from my experience and doing business with the Japanese, but I much prefer interacting with colleagues on LINE or company approved Viber as we communicate more efficiently. (Quick contextual background: the Japanese language has four different ways of speech, two honorifics. The honorifics require buffer language — a lot of set phrases before getting to the point. Chat apps tend to cut all that out.)

Aside from the communication utility, chat apps in Asia are evolving from tools to full fledged platforms. I keep repeating this but it’s almost necessary, as there are people still comparing WhatsApp, Viber, Telegram and Snapchat to LINE, WeChat and KakaoTalk. WhatsApp, Viber, Telegram and Snapchat are used for communication only. With LINE, WeChat and KakaoTalk  usres can text, call, video chat, edit photos, play games, get coupons/discounts… and now WeChat allows their users to shop. In their app. Asian chat apps are more than chat apps, they are turning into ecosystems.

The Asia chat app market is truly something else but I think one has to live in China, Korea or Japan to experience the phenomenon for themselves. At least for me that was the case. In a mere six months chat apps have completely changed the way I communicate and also purchase via mobile.

God, I love technology and I love being in Asia seeing, breathing and living the evolving products and market.

Messaging Apps are Communication Tools

Finally – I get it now. And by it, I mean the WhatsApp acquisition by Facebook.

It’s what I’ve been preaching — that messaging apps are not social networks. They are communication tools / utilities.

So basically, Facebook just bought a telephone company.

But I’m still wondering what is going to happen when messaging apps fully evolve to multi-faceted platforms (gaming, commerce, communication tools); basically the ‘what’s next‘. WhatsApp is going to be left behind.

Only time will tell. I guess.

 

WhatsApp: Time to Grow-up and Start Making Money

There is a piece on All Things D about WhatsApp’s CEO calling out other messaging apps and their “bullshit metrics”.

“We want to steer the conversation to be about active users, not registered users,” said WhatsApp CEO Jan Koum. “We’re a bit fed up and frustrated about people talking about registered users. We think it’s important for us as a leader in the space to speak up and be ethical.”

…the CEO, Jan Koum says.

In a competitive space as messaging apps, it’s no longer just about mass adoption. WhatsApp is the most adopted in markets where users do not spend.

These charts basically speak for themselves. Their pay-per-dowload and one dollar annual fee is cute, compared to the business oriented players as Line, KakaoTalk and WeChat.

Messaging apps are not social networks. They are communication tools and now, moving on to becoming businesses, shifting from apps to e-commerce.

I can’t be the only one who thinks it’s peculiar how WeChat has the most MAUs (monthly active users), yet they are profiting the least.

Calling out other players in the messaging space is nice and all but “we have the most users! we are superior!” mind-set is no longer enough.

Time to grow-up and answer the question: Where is the monetization strategy? #1 in MUAs, last in revenues. Hi, Facebook.

*All Things D piece is here
chart sources 1, 2