Has Japan’s Most Popular Messaging App Peaked?

By Pavel Alpeyev, Pavel Alpeyev, Yuji Nakamura Yuji Nakamura and Adrian Leung Adrian Leung

Line Corp. is about to go public, in what could be the biggest tech IPO of 2016. The operator of Japan’s most popular messaging service now has its sights set on expanding across Asia, and - eventually - the U.S. Here’s what you need to know.

Inside the Line Ecosystem

Line’s messaging empire spans 218 million users and an ecosystem of services ranging from games and stamps to on-demand taxis and streaming media. The company is looking to expand further beyond its home market, which means raising money and taking on larger rivals Facebook and Tencent.

Line’s “smart portal” platform

LINE Applications

Games

Manga

Live

Tools

Camera

Fortune

218,000,000

News

Pay

active global users

Weather

Taxi

Participants And Contributors

Game Developers

Sticker Theme Creators

Brand Owners

Content Providers

Advertisers

Payment Processing Service Providers

Merchants

Play

Video

Music

Brush

LINE Applications

218,000,000

active global users

Games

Live

Camera

News

Tools

Weather

Play

Music

Fortune

Manga

Pay

Taxi

Brush

Video

Participants And Contributors

Game Developers

Sticker Theme Creators

Brand Owners

Content Providers

Advertisers

Payment Processing Service Providers

Merchants

Seeking New Users

Line dominates the messaging market in Japan, Taiwan and Thailand. Instead of competing with Facebook’s Messenger and WhatsApp in Europe and the U.S., the Tokyo-based company has set its sights, for now, on emerging Asian markets and the Middle East. It’s tailoring its service to countries like Malaysia and Indonesia, where smartphone adoption is still under way.

Line’s Market Performance

Percentage of messaging app users who use Line

Hong Kong

35%

UK

3%

India

25%

Japan

94%

USA

12%

Taiwan

83%

Saudi Arabia

41%

Mexico

19%

UAE

18%

Thailand

85%

Singapore

28%

Indonesia

66%

South Africa

6%

Australia

7%

Argentina

11%

Base: Messaging App users aged 16-64, Q1 2016

Japan

94%

Thailand

85%

Taiwan

83%

Indonesia

66%

Saudi Arabia

41%

Hong Kong

35%

Singapore

28%

India

25%

Mexico

19%

UAE

18%

USA

12%

Argentina

11%

Australia

7%

South Africa

6%

UK

3%

Base: Messaging App users aged 16-64, Q1 2016

Rivals Are Catching Up

Line has had a head start on other messaging apps in monetizing its user base, generating more than $800 million in revenue from stickers and games last year. But growth is slowing. And now rivals from Facebook to Snapchat are catching up and turning their apps into one-stop-shop smartphone platforms providing paid-for services. Going forward, Line’s ability to draw in users – and hold onto them – may increasingly depend on chatbot services, interfaces for the internet of things and artificial intelligence-driven offerings. 

What’s the Big Deal With Stickers

1 out of 10 messages is a sticker, although usage has peaked

Messages and stickers sent

Stickers as percent of messages

Messages sent

Stickers sent

Usage peaked during the first quarter of 2014

and has been

trending down

14%

4,000

(in millions)

3,000

12%

10%

2,000

8%

1,000

O

6%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

2013

2016

2013

2014

2015

2016

Messages and stickers sent

Messages sent

Stickers sent

0

1,000

3,000

2,000

4,000

(in millions)

Q1

2013

Q2

Q3

Q4

Q1

2014

Q2

Q3

Q4

Q1

Q2

2015

Q3

Q4

2016

Q1

Stickers as percent of messages

Usage peaked

during the first

quarter of 2014

and has been

trending down

14%

12%

10%

8%

6%

2013

2016

Line may have pioneered the business model its larger competitors have now emulated, but the app operator’s future success now depends on its ability to win over new audiences – and that will require further innovation.