Posted on Tuesday, Sep 27th 2016
According to eMarketer, over-the-top (OTT) mobile messaging services were used by more than 1.4 billion consumers in 2015, recording a 32% growth over the year. Total users are expected to grow to 2.19 billion by the year 2019 and will account for 68% of mobile phone Internet users. Two years ago, Japan’s mobile messaging service Line had abandoned plans to list. But early this year, the company finally took the plunge.
The company Line began in 2000 as part of South Korea’s Naver Corp’s Japanese entity. Initially the company was founded as an online game company under Naver’s gaming brand Hangame. Soon it evolved to include multiple online services. Then in 2011 when the tsunami struck Japan, Naver’s Japanese employees were unable to communicate with each other. The phone lines were down after the tsunami, and the Line app was developed so that the employees could contact each other.
Today, Line has become a leading global platform for mobile messaging and communication services including content distribution and advertising. Its mobile messaging application operates on all major mobile operating systems and allows users to communicate through free instant messaging, voice calls, and video calls. It provides its users with access to social and interactive content and services including access to mobile games, music, and online-to-offline (O2O) services. Its O2O services include payment services, job posting, restaurant reservation, and taxi booking services.
Line may have been founded in Japan, but now its users are present in more than 230 countries. As of March 2016, the service had over 218 million monthly active users with 152 million of them located in Japan, Taiwan, Thailand, and Indonesia. Compare that with WhatsApp user base of over 1 billion users globally. Line provides its services in 19 languages to cater to local needs. The app saw an exchange of an average of 20.4 billion messages daily and its average daily active users accounted for 61.4% of its MAUs globally.
Line earns revenues through multiple sources. Primary sources of revenues are games, advertising, and sale of virtual goods such as stickers. Revenues have grown significantly over the past few years. Revenues grew from ¥39,586 million (~$ 391 million) in 2013 to ¥86,366 million (~$854 million) in 2014 to ¥120,406 million (~$1.19 billion) in 2015. For the first three months of the current year, revenues came in ¥33,456 million (~$331 million), growing 21% over the year. Line does not disclose the breakout by segment for its revenues, but it is expected that stickers account for nearly a quarter of its revenues.
Like other companies of its time, Line is still not profitable. It ended 2015 with a net loss of ¥7,972 million (~78.9 million). For the first three months of the current year, losses have reduced 88% to ¥234 million ($2.3 million). Line hopes to improve advertising revenues in the years to help drive profits.
Line is much more than a messaging service and it treats its market opportunity to include mobile content that is geared toward social experiences. According to an IDC report, consumer spending on paid content on mobile devices is projected to grow from $75.6 billion in 2015 to $256 billion in 2020. Line is counting on this growth to help drive its revenues.
Line was a wholly owned subsidiary of the Naver Corporation till July this year when it went public on the NYSE to raise $1.14 billion, making it the biggest IPO in America in the IPO scarce year. Line was valued at $7 billion at the time of its listing. As part of its listing, Line sold 35 million shares, split between 13 million shares on the Tokyo Stock Exchange and 22 million American depositary receipt on the New York Stock Exchange under the ticker LN.
Line plans to use most of these newly acquired funds toward acquisitions. It wishes to transform its messaging app into an all-in-one portal for its Asian users. It believes it can enhance its offerings through the addition of capabilities such as artificial intelligence and video streaming along with added capabilities within mobile gaming and advertising.
Line’s stock has done okay since the listing. The stock soared 33% to $42 on the NYSE on the day of its listing. It is currently trading at $46.18 with a market capitalization of $9.72 billion. It touched a 52-week high of $48.10 in August this year and has recovered from a 52 week low of $36.01 it had fallen to soon after listing.
More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.
Photo Credit: Jon Russell /Flickr.com
This segment is a part in the series : Billion Dollar Unicorns
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