Market Insight

LINE aims to go public in Japan and the United States in July 2016

June 13, 2016

Jun Wen Woo Jun Wen Woo Senior Research Analyst, Online Video

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Japanese messaging app LINE announced plans to file for an initial public offering (IPO) in both Japan and the United States in July 2016. This is to further strengthen its position in Asia and its continuing international expansion efforts. The company revealed that it expects the listing of American Depository Shares (ADSs) on the New York Stock Exchange to happen around July 16, 2016 and the listing on Tokyo Stock Exchange around July 15, 2016, subject to approvals by relevant authorities.

Founded in September 2000, LINE Corporation is a Japanese subsidiary of South Korean internet company Naver Corporation. LINE has been growing its platform by introducing a range of services and investments, from media content (video, music and games) to services (mobile payment, transportation, food delivery, etc). LINE also announced its plan to enter into mobile operator business in summer 2016. Most of LINE’s revenue is from advertising and games, both businesses each accounting for 35% of revenues, followed by stickers at 22%.

Our analysis:

LINE will be the first messaging app that goes public, as a separate entity from its parent company. The company first announced its plan for an IPO in 2014, however this was delayed for two years. LINE explained that the delayed was due to the unstable global market situation and the company's decision to focus on global expansion before going public.

In the first quarter of 2016, LINE announced that it reached 218 million monthly active users (MAU), with almost 70% of them from its major four countries – Japan, Taiwan, Thailand and Indonesia. Its MAU outside these markets have been decreasing over time. LINE needs to address this decline if it is to continue to grow and should into the different interests of international users as part of its long-term user acquisition strategy.

In Asia, LINE competes with other regional players like WeChat (762 million MAU in the first quarter of 2016 – largely in China) and KakaoTalk (49 million MAU; mainly in South Korea). Asian messaging app ares generally more country and regional focused than global players such as Facebook’s Messenger and Whatsapp. WeChat does not disclose the number of users in its home country and IHS estimates that the vast majority of its users are from China, as the majority of the app's features such as WeChat Pay are limited to China. 83% of Kakao users are in South Korea. LINE has found some success outside its core domestic Japanese market, but it is still limited to a few key geographies. LINE's success in the region is through its localisation strategy by launching content and services targeting different countries. Outside Japan, LINE launched LINE Manga and LINE Webtoon in Taiwan, LINE Shop and LINE Dictionary (English-Thailand) in Thailand, LINE Dictionary (English-Indonesia) in Indonesia.

Other competitors like Facebook Messenger (900 million MAU) and Whatsapp (1 billion MAU) are the two most successful messaging apps globally. WhatsApp remains focused on messaging and communications. Messenger has been increasing the content and services support for its platform, but most of the services such as payment and taxi hailing are limited to the US market.

LINE's content and services are also available in different applications, which the company termed its "LINE Family Apps". This is different from other messaging apps where content and services are usually available within the same application.

With its application being not available in China, LINE will need to focus global expansion to grow its user base outside Asia. There is still a lot of potential for growth outside the region but the company will have to explore different strategies tailored to local markets and different user interests.

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