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Line Abandons IPO Plans

Posted on Wednesday, Nov 19th 2014

Earlier this year, Facebook acquired WhatsApp for a whopping $22 billion sparking interest in the mobile messaging industry. Soon after the acquisition, South Korean mobile messaging leader Line filed papers to list on the Tokyo Exchange and the NYSE earlier this fall.  The company claimed that they would much rather follow the IPO route than be sold to a bigger player. But in a surprising move, Line went back on their earlier plans and announced that they would abandon their IPO.

Line App’s Financials
Naver Corp’s Line was established in Japan to help Naver’s Japanese employees communicate with each other in the absence of phone lines following the 2011 tsunami. Line soon became more than a mobile messaging app and began offering premium services such as voice and video calls, photo sharing, fancy stickers and emoticons, social networking like timeline features, and even games. Unlike WhatsApp’s subscriber fee model that becomes active after one year of free service, Line earns revenues by selling to their customers these premium features and through in-app purchases on their gaming platform.

Line’s registered user base has increased from more than 100 million within 18 months of launch in 2011 to over 560 million as of earlier this October. However, Line recently revealed that they have a comparatively smaller active user base at only 170 million. Japan, Thailand, and Taiwan are their biggest markets. They are slowly adding international presence and have 100 million registered users in 11 markets worldwide including 25 million in the US and 30 million in India.

Line filed their papers confidentially, thus keeping their detailed financials still hidden from public scrutiny. They did reveal that they earned 51.8 billion Yen (~$508 million) in revenues last year. Of this, revenues from games, sales of virtual stickers, and advertising were estimated at $323 million. For the recently ended third quarter this year, revenues grew 104% over the year and 18% over the quarter to 20.9 billion yen (~$192 million).  At the time of filing for listing, Line was valued at more than $9 billion.

Line’s Improving Monetization
Not surprisingly, Line has significantly higher revenues than WhatsApp. According to recent reports, WhatsApp has an active user base of nearly 600 million with revenues of $10 million. And it doesn’t want to stop here. Last month, Line announced several new monetization plans that include launching a mobile payment service and a music streaming service.

Line’s mobile payment service Line Pay app will let users purchase products using their phones, which would be linked to either credit cards or the user’s bank accounts. The app will also feature money transfer capabilities, letting users transfer money to family or friends. They also tied up with Sony Music and Avex Digital to release their subscription-based music streaming service.

Other services expected to be released soon are a mobile taxi app similar to Uber, Google Maps for indoors, and a food delivery service.

In August this year, Line also earmarked $100 million toward digital gaming initiatives. They acquired 10% stake in game company Gumi in a deal that will let Gumi develop games suited for Line’s platform.

Line Abandons IPO Plans
In a surprising move, Line recently announced plans to pull back their IPO from both exchanges. The company says that they want to strengthen their business and financials before going public. The news has sparked speculation that Line may be looking at investment from some other big player to help increase its valuation.

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