How Japan's Line App Became A Culture-Changing, Revenue-Generating Phenomenon: It's already a powerhouse in messaging, entertainment and merchandise, with payments and more on the way. Next stop: America.
Less than four years after Line’s launch, the company says that more than 560 million people worldwide have registered as members, the majority of them in Japan, Taiwan, and Thailand. One hundred eighty one million users log in to the Line app each month. While that’s a smaller user base than WhatsApp (700 million monthly active users according to research firm Canalys), Facebook Messenger (500 million), and Tencent’s WeChat (480 million), Line has done a remarkable job of turning its popularity into a growing, diversified business.
Its reported revenue of $656 million in 2014 comes from a range of sources that few rivals can match: It sells games that can be played solo or with other Line users; those digital stickers, which can be purchased to express a dizzying array of emotions; marketing deals with brands and celebrities that want to reach its user base; and merchandise such as the products at the Harajuku shop. Meanwhile, Facebook has yet to spell out how it intends to make money from Messenger or WhatsApp, which it purchased last year for a history-making $22 billion. –Harry McCracken (Fast Company)
Fantastic feature by Fast Company on the Line Corporation (Who are also planning to IPO as well. Might be a good buy).
I've decided to (like the interview of BuzzFeed's founder) attach snippets of the article below and make some annotations/notes on it.
Links, annotations and in-line commentary in the notes are mine.
Snippets from the Linked Article:
#1: Insight into Line's popularity in the East Asian region.
Line stands out for the way it has used pop culture to turn its app into a full-fledged platform. Its influence is huge. "In Japan, young people often swap Line IDs like only a few years ago they’d swap email addresses or phone numbers," says Brian Ashcraft, an Osaka-based correspondent for gaming site Kotaku and coauthor of Japanese Schoolgirl Confidential. The app "is by far the default form of communication for anyone in Taiwan," says Ben Thompson, who writes about technology at his Stratechery site from Taipei. "It would be difficult to function here without it."
#2: IPO and growth of Line Corporation.
Line is reportedly preparing for an IPO. But it has held off until it can prove that it can be as relevant everywhere as it is in Japan. Already, it has 27 million U.S. subscribers signed up, with nearly 4 million using the service regularly. The question now is simply how far this strange mix of Disney-meets-Skype-meets-Facebook can go.
#3: Dress and location.
Line is headquartered in Shibuya Hikarie, a gleaming high-rise in the heart of Shibuya, the Times Square–like hub of commerce centered around one of Japan’s busiest train stations. I am here to meet Takeshi Idezawa, who was promoted from COO to CEO of Line Corp. in December 2014. Expecting Japanese formality, I’ve donned a suit and tie for the occasion, but Idezawa is dressed like a Silicon Valley exec, in a collarless gray shirt under a gray jacket. The offices are reminiscent of the Harajuku store, with larger-than-life-size figures of Brown, Cony, and their animated compatriots in the hall. Even the bottled water served on the premises sports Line characters on its labels.
#4: The birth of an empire: always from a humble beginning. What's unusual about Line, however, is that it came from an already-established corporation, Naver, from South Korea (albeit it was in a subsidiary).
Idezawa tells me Line’s humble origin story, how it was born from a three-person team in the Tokyo office of the Korean Internet powerhouse Naver (which, among other things, runs Korea’s largest search engine). The goal: Devise a new business opportunity. The brief: "It had to be for smartphones," he says. "Number two, it had to be useful for communication." Tumblr was catching on in Japan at the time, and at first, the team noodled around with a photo-sharing idea inspired by its success.
As the team was considering its options, disaster struck: the worst earthquake ever recorded in Japan, the magnitude-9 Tōhoku quake, which hit off the country’s coast on March 11, 2011. Landline and wireless phone infrastructure were overwhelmed, preventing people from reaching loved ones and confirming that they were okay.
"Even in Tokyo, we were not able to use mobile phones," Idezawa remembers. "It was really a devastating situation." The Internet, however, held up reasonably well. People turned to social networks such as Twitter to stay in touch. But such services also became breeding grounds for rumors about the quake and its aftereffects.
Seeing both the promise and pitfalls of social networking led the team to decide that its new app should emphasize private, one-to-one conversation. Line went live on June 23, 2011. (Naver spun off Line into a wholly owned subsidiary in 2013.)
#5: Stickers. Not merely a messaging gimmick, but the cornerstone of the social experience in East Asia.
The market for apps that let users send text messages to friends and family without paying a wireless carrier’s per-message fees was exploding, especially in Asia. But Line’s original incarnation didn’t stand out from the pack. "The turning point," Idezawa says, "was when we released stickers."
#6: Line characters, and how they allow Line to differentiate itself from other 'me-too' stickers messaging apps.
Despite their cherubic appearance, these characters are explicitly adults, and part of their appeal is that they seem to have lives beyond their existence as mere pieces of digital content. Cony and Brown, for example are romantically involved: One sticker set shows them going out to dinner, shopping for a handbag, watching a 3-D movie, and—Hello Kitty this isn’t—lying in bed together. "Moon’s Dieting Special" offers images of him doing sit-ups and dolefully staring at a plate of vegetables. A pack of James stickers includes one depicting the usually ebullient fellow unshaven and dozing in front of the TV with empty cans at his feet, suggesting a rare moment of personal crisis.
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Because of the Line stars’ vivid personalities, people bond with them in a way that they don’t with emoticons or emoji—or with stickers from other apps that cribbed the feature after it took off on Line, such as Facebook. "Stickers like Cony and Brown are fun to use because they have a wide range of emotions, without many limitations," says Melissa Palacios, an artist in San Francisco whose own sticker featuring a tabby named Tora was recently voted Best Sticker in the Universe by Line users. "Anyone can see a little bit of themselves in them."
#7: Stats on stickers.
Users send close to 2 billion stickers a day, and Line constantly adds new ones, often in digital sets that are offered for free or for purchase with Line’s digital coins, which users can buy or accumulate by winning online games. There’s also a bevy of licensed properties now available as sticker sets, ranging from Snoopy to Elmo, Doctor Who, and local favorites Hello Kitty and Doraemon.
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This nod toward globalization has inspired creators from 145 countries to make 30,000 sticker packs in seven months. Users bought a total of 1.4 billion of these stickers in that period, for a gross of about $30 million.
#8: Engagement with the creative community. It's very Valve-esque.
Last April, Line opened up a Creators Market that lets anyone design and submit stickers. Line lightly curates the entries—no sex, no violence, nothing illegal or sacrilegious—and then offers the ones it approves for downloading. Creators can choose to offer them for free or with a price tag attached. The company splits revenue with artists 50-50.
The Creators Market grew out of the company’s realization that its staff of sticker artists in Tokyo could never keep up with the needs of its increasingly international audience. "We really needed local people to express their own feelings in their own way, not just the Japanese way," says Naotomo Watanabe, manager of Line’s sticker business planning team, "And we wanted to widen up the ways of expression."
#9: Licensing and engagement with the old brands.
Stickers are Line’s second-biggest source of revenue, but they fuel the rest of the company’s business. Line’s relationship with Disney illuminates how this works. The two companies first worked together when Line licensed Mickey Mouse for a sticker pack in 2012. More than 50 other packs have followed, featuring characters from Disney cartoons and Pixar, Marvel, and Star Wars classics. "Because we were having so much success around stickers, we decided to talk about what else Disney and Line could be doing together," says Jimmy Pitaro, president of Disney Interactive. "That conversation very quickly revolved around gaming."
#10: Line Corporation pivoting from merely providing a messaging experience, towards a more holistic media/engagement ecosystem.
Line, like Tencent, recognized early the potential for using its messaging platform to market and distribute games. The company entered gaming in July 2012; its first four titles included Line Pop, a game which is eerily similar to Bejeweled or Candy Crush Saga except that it involves matching tiny Line-character heads instead of gems or sweets.
Now games provide the majority of Line Corporation's revenue. As with most popular mobile games, Line’s are free to play, with the option to fork over money to progress more rapidly than you could through raw skill. For Line, the challenge is to keep the hits coming: In January 2015, Naver's stock tumbled when its profits missed estimates and the company said that Line Rangers, a game featuring the characters as superheroes, was slipping in popularity.
#11: Merchandising as an alternate revenue source.
Merchandise featuring Line’s own characters is now a major business for the company, but Idezawa admits that he didn’t see that revenue stream coming. It only occurred to him when he took a business trip to Taiwan and was startled to see Brown and Cony on products there—all pirated. Rather than being ticked off over the theft of Line’s intellectual property, he says, "I interpreted that as demand from the users." Upon his return, he started doing deals for official gear.
#12: The 21st century approach to merchandising intellectual property.
Unlike typical character products, including much of the Line merch sold elsewhere, many of the goods sold in Line Friends shops successfully cater to grown-up tastes and needs. Along with the Swarovski cut-glass figures, Line is working with other upscale partners such as Swedish paper-goods producer Bookbinders Design and Finnish housewares maker Muurla. The latter has manufactured 250,000 Line items to date, including enamelware mugs, glass plates, and wooden trays, displayed in a section of the Harajuku store that looks like a Line-themed Crate & Barrel. "During the development of the project, Line nearly tripled the size of the original order, so I bet they like the product line," says Jussi Iota, Muurla’s chief operating officer.
#13: Selling access to users.
Line is also placing growing emphasis on another business opportunity rife with potential: selling access to its users. Unlike Silicon Valley–born social networks such as Facebook, Pinterest, and Twitter, which let companies participate for free and then try to sell them ads, Line charges for official accounts on the service. If a business or celebrity wants to blast out messages to its followers, that too involves a payment, as does giving users the ability to respond. So do sponsored sticker packs.
Everyone from Kit Kat and KFC to the prime minister's official residence finds the proposition to be worthwhile. After Toyota airs a new commercial in its Toyotown campaign, for instance, it can follow up by offering its 14.3 million Line followers stickers featuring AKB48, an insanely popular Japanese girl group with (at last count) 187 members. The automaker gets its message out; consumers get free stuff; Line gets paid. Everybody’s happy. Official accounts and merchandise make up the rest of Line’s revenue mix.
The fact that these commercial missives show up in the same stream as private chats (and only after a Line user has chosen to follow a brand or person) gives them a higher profile and greater sense of urgency than other forms of social marketing such as Facebook ads and Twitter’s promoted tweets. "It’s like direct mail," says Stratechery’s Thompson. "That’s a part of marketing that very few people pay attention to, but it’s super-effective. A brand gets a direct connection to the customer. It’s very powerful, and in the long run it has the potential to be very compelling."
#14: Transition into a fully-fledged platform holder/owner.
Official account holders can also use a service that Line launched in February 2014 called Business Connect to build their own automated consumer experiences. For instance, Japan Post, the Japanese mail provider, created a service that lets Line users send photos that it turns into printed New Year’s cards and delivers via snail mail. Last August, the Japanese online broker SBI Securities introduced stock trading in the app. Line CEO Idezawa envisions even the most mundane transactions, such as an insurance company’s customer support, being handled via Line—with it collecting payments along the way.
#15: Becoming slightly like Rocket Internet/Alibaba.
But rather than being purely digital, many of Line's new services involve a real-world aspect. Line Wow, offered in collaboration with a Korean company and available at first only in Line’s own neighborhood of Shibuya, is a food delivery service, with plans to offer other sorts of products in the future. Line Taxi, launching first in Tokyo, lets you call a cab. Line Maps for Indoor is a smartphone app that lets shoppers navigate their way around malls and department stores. In Thailand, the company is Line Pay is a new payment service that the company says will eventually support offline retail purchases (like Apple Pay or Google Wallet) and person-to-person money transfers (like PayPal).
#16: Becoming a consumer platform, in their own words.
Line, in other words, intends to leverage its strength in messaging to become a sprawling, all-encompassing consumer platform. "We know what we want to do," says Idezawa matter-of-factly. "Our intention is to become No. 1 in the smartphone field."
#17: Risk of imperial overstretch. Digital/media empires rise and fall all the time. Yahoo!. AOL. Potentially Google (Failure to engage the new mobile/'apps'-based generation).
Looking at everything Line is trying to roll out, you could come to the conclusion that the company is indulging in risky, hubristic overreach. Or you could find it dazzling that an app that started out as a way to avoid paying for text messages and phone calls is pursuing so many different sources of income.
Thompson for one is impressed by the way that Line is turning communications into commerce: "Line owns the whole enchilada. They own the part that lets you know something is available. And they own the something." Only Tencent’s WeChat is pursuing a similar approach with anything like the same success, he says.
#18: Globalisation or glocalisation?
Line has a long way to go before it will achieve its most audacious goals. And it's already so pervasive in its key markets that there aren't many users left to sign up. In fact, some Line watchers are already wondering whether there are signs that its growth is slowing.
To go to the next level, the company will need more than cute new features; it will need global scale. Idezawa emphasizes that what works in Japan doesn't necessarily work everywhere. "Different regions have different cultures," he says. "When we localize, we really have to see what’s going on and try to suit their needs."
#19: Localisation and America.
Localization is a novel concept in messaging. Tencent offers two versions of its popular messenger—Weixin in China and WeChat in the rest of the world. But only Line has thought about how it should tailor its service in every country it enters. Some of these actions can be rather simple. In the Italian version of Line, for example, Moon adopts a classic local gesture when he flicks his fingers under his chin to indicate "I don’t care."
There’s arguably no other Western country that means more to Line’s future than the U.S., but the company hasn’t rushed into the market. The 27 million registered members it has is a meager percentage of Americans compared with Line’s saturation in its top countries. (According to comScore, Facebook’s Messenger app had 70.4 million active users a month in the U.S. in November 2014—far more than any other communications app, and more than 18 times as many active users as Line.)
#20: Line and the Europe/America region.
The prime architect of Line’s American strategy is Jeanie Han, CEO of a group that the company calls Line Euro-Americas. Based at the company’s Los Angeles office, Han is a bubbly Korean-American with a PhD in marketing who spent a decade as an executive at Paramount Pictures before she joined Line in 2012. Han admits that initially she was nervous that Westerners wouldn’t bond with Line’s spirit. But when she launched Line in Spain in 2013, she discovered that "Cony and Brown are the most downloaded sticker packs in the app. So they’re not too Asian." According to Canalys, Spain is now Line’s fourth biggest country, with 20 million registered users. "Given that the population of Spain is about 47 million, that is an incredible statistic," says Joe Kempton, a Canalys analyst.
#21: Tailoring of content towards the US.
Still, some westernization has been required. For example, her L.A.–based design team hired one artist, Dan Woodger, to crank out 1,000 new emoji in a 10-week sprint. It was an unusually collaborative effort, Woodger says: Each week, "Line would come up with 60 [emoji] that they wanted, and I was free to come up with 40. A lot of the time, you have to get things signed off by 10 people, but they were very open."
The more American brands take notice of Line, the more American the app will feel. For instance, a company called Bare Tree Media is working with partners such as the NFL Players Association and the producers of the Sharknado TV movies to create content with stateside appeal. "We love cute stickers, but we also love something that might be edgier, or more appropriate for a 25-year-old guy to send versus a 16-year-old girl," says Bare Tree founder and CEO Robert Ferrari, who once helped manage Hello Kitty’s career at Sanrio.
#22: User engagement.
Taylor Swift has almost six times as many followers on Twitter than the 8.4 million she has on Line. But she routinely receives more likes for her posts on Line than for the same items on Twitter, suggesting that Line users are an unusually engaged bunch. Swift also posts brief audio notes that show up in her Line followers' chat inboxes, as if they came from a friend—a feature with no counterpart on Twitter. "She’s super-talented, super-authentic, super-original," says Jae Hyung Kim, head of strategy and operations for Line Euro-Americas. "And doing little things like that really, really resonates with her users."
Han has extended its connection with pop music via a deal with IHeartMedia, the radio giant formerly known as Clear Channel. IHeartMedia first created Line official accounts for its broadcast personalities in San Diego, then promoted them on the air. "Within six months in San Diego, our Line followers surpassed our followers that were connected with us through Facebook, Instagram, and Twitter combined," says Michael Preacher, iHeartMedia's VP of strategic partnerships. With close to 750,000 San Diegans now following its Line accounts, the company has expanded the program to its two biggest markets, New York and L.A.
#23: Peak Facebook?
A still greater sign that Line has arrived may be a new piece of software in the iPhone and Android app stores. Its name is Stickered, and it lets you decorate photos with stickers—very much like a Line app called Line Camera. Its publisher? Facebook, whose radar for potential threats is finely tuned.
Idezawa denies that Line sees Facebook as competition: "Of course they do some messaging, but basically they’re more open, while we are more closed and private," he tells me. Still, there’s no greater validation of a new social behavior than Mark Zuckerberg taking note of an innovation and cloning it.
The difference is that Facebook’s stickers feel like a sideline, not a core feature. They make no effort to match the charm and humor of Line’s cast of characters. Mimicking another app’s features may be easy, but stealing its soul is not.