Tonight I’ll be going to practice with Wadaiko Uzu, a community taiko group based in the Uji area. This ensemble of 25 mostly elderly men and women communicates almost entirely via LINE, a messaging app that has become ubiquitous in Japanese society: among a population of 126 million people, 79 million people use LINE monthly and over 67 million use the app every day. These usage statistics are in fact so high that ceiling effects have stalled user growth, but they nonetheless represent a prime revenue opportunity.
In contrast with some messaging platforms such as WhatsApp, LINE is a well-monetized messaging platform. LINE makes its money in three primary categories, the largest being advertising (35%): celebrities and businesses can create LINE Official Accounts to send mass-messages to their followers, post to the LINE Timeline, create PR pages with coupons, and more (allowing LINE to take a cut of the advertising revenue). Companies can also create Sponsored Stickers for their brand mascots or put ads in LINE NEWS. LINE also allows users to buy sticker packs or create and sell their own LINE themes, and even has free-to-play video games with in-app purchases that allow users to progress through the game (many of which are developed in-house by LINE). Despite these monetization strategies, LINE’s flat user growth have contributed to a ¥33.9B net loss in the first three quarters of 2019.
The leading messaging app in Japan, Taiwan, and Thailand, LINE has a $10B market cap and is owned by South Korean search engine company Naver. Naver and Japanese mega-conglomerate holding company Softbank are drafting a $27B merger between Naver’s LINE and Softbank-owned Yahoo! Japan. Yahoo! Japan, originally formed as a joint venture between Yahoo! and Softbank but now wholly owned by Softbank subsidiary Z Holdings, offers Japan’s dominant search engine and is a leader in online advertising, e-commerce, financial services, and more.
In creating this new mega-company, LINE and Yahoo! Japan aim to learn from the success of WeChat in China by bundling their respective leading services into a potential super-app of their own. In the face of rising competition from tech giants in the US (Google, Facebook, Amazon, Apple) and China (Tencent, Huawei, Alibaba), the pair aim to reduce competition and take advantage of their current market positions to be a one-stop shop for Japanese users. Mobile payments is one key vertical that this could affect, with both LINE Pay and Softbank/Yahoo’s Pay Pay boasting tens of millions of users.
Softbank’s taken a string of losses recently, most notably with the collapse of WeWork, and the strong positive investor reaction to the proposed merger are sure to come as welcome news for Masayoshi Son and the rest of the Softbank team.
- Arjun Kumar
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