Mobile messaging app Line saw its revenue decrease quarter-on-quarter for the first time as the Japanese company battles to grow its user base amid increased competition worldwide.
The company, which saw its monthly active user count rise by 6 million to 211 million, posted revenues of 27.8 billion JPY ($224 million) for Q2 2015. That represents a 37 percent year-on-year increase, but a 1 percent decrease on its previous quarter of business.
Line, which is owned by Korean internet giant Naver, makes its money through in-app purchases within titles on its games platform, by selling stickers, and through a platform that allows brands to connect with it users. The four-year-old company posted stellar revenue growth last year — its Q3 2014 doubled year-on-year, for example — but its failure to expand successfully beyond parts of Asia (half of Line’s users are located in its three strongest markets: Japan, Thailand and Taiwan) has ground things to a halt.
The company has turned in a range of new services aimed at helping it grow its network in new markets — a keyboard app for iOS is designed to get users in SMS-centric U.S. into its ecosystem, while a new ‘lite’ app is aimed at emerging market Android owners.
But messaging apps are not like social networks. You don’t chat or send stickers to yourself, so onboarding new users requires them to bring their friends over, and remain there, too. No friends, means no network effect, which means little engagement and low monetization opportunities.
To its credit, Line has seen this coming and it has expanded its focus from chat to becoming a mobile content portal of sorts. The company has outed a range of digital services — including a YouTube-like TV service, a paid music streaming app, and mobile payments — and expanded into online-to-offline services with a taxi-hailing service, grocery delivery pilot and more. But in each of these cases, the services have only been launched in markets where Line has a strong user base — the aforementioned Japan, Thailand and Taiwan — because they only stand a chance of success with users who are highly engaged. That again comes back to the network effect, which Line has struggled to reproduce outside of its three core markets.
https://twitter.com/geoffreyfowler/status/626608353045667841
The company’s revenue growth was always likely to slow given the increasing maturity of messaging apps worldwide, but, with it believed to be considering a public listing this year — it aborted a planned dual U.S.-Japan IPO in 2014 — it needs to show prospective investors that its business has the legs to continue to develop, both in terms of users and revenue.
It’s hard to see Line making serious inroads in other markets worldwide because mobile messaging is no longer new, and every country already has its favorite app. Maybe it’s time for the firm to hunker down on its three key countries and capitalize on its popularity to really own the mobile experience and push its digital and online-to-offline services.
In other news from Line today, the company launched a packaged Chrome app. It already has apps for Windows and Mac, but this new addition includes a note-taking feature.
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