Asian mobile chat apps challenge western dominance; “When you use Asian mobile chat apps, you have a certain sense of joy and fun communicating with your loved ones, whereas western apps focus more on pure functionality”

August 1, 2013 1:56 pm

Asian mobile chat apps challenge western dominance

By Ben Bland in Jakarta, Nguyen Phuong Linh in Hanoi and Simon Mundy in Seoul

Nguyen Tung Lam, a 16-year-old high school student in Hanoi, uses Japanese mobile messaging service Line to chat with his girlfriend because she “likes the cute icons such as the teddy bear and bunny”. Doan Nguyen Trang, another Vietnamese teenager, prefers South Korea’s KakaoTalk app because it is promoted by a wildly popular Korean boy band. “I use KakaoTalk because Big Bang also use it and they are number one; I love them,” says the 14-year-old. KakaoTalk, Line and WeChat, a mobile messaging app developed by China’s Tencent, are spending tens of millions of dollars on television advertising, online promotions and celebrity endorsements as they fight for the attention of tech-savvy southeast Asian teenagers.With a population of 600m people, a burgeoning middle class and fast-rising smartphone sales, southeast Asia has become the front line in a battle for mobile phone users that is threatening the traditional dominance of mobile phone network operators, global internet companies such as Facebook and Google and now-struggling handset maker BlackBerry.

Like their western rivals, KakaoTalk, Line and WeChat allow users to send free messages through mobile internet connections but their playful, teen-friendly style has set them apart, driving them to the top of many app download charts.

“When you use Asian mobile chat apps such as KakaoTalk or Line, you have a certain sense of joy and fun communicating with your loved ones, whereas western apps focus more on pure functionality,” says Le Hong Minh, chairman of VNG Corporation, Vietnam’s leading internet company.

KakaoTalk sparked the Asian mobile messaging revolution when it launched in 2010, but it has been overtaken by Line which this month crossed the 200m user threshold, just two years after its inception – an accomplishment that took Facebook and Twitter more than five years.

“Facebook and Google definitely see these mobile messaging apps as a threat,” says Mark Ranson, an analyst at technology research company Ovum.

BlackBerry, long dominant in Indonesia because of its free Messenger service, is losing ground because of growing competition from the Asian chat apps that can be downloaded on to any smartphone.

When you use Asian mobile chat apps . . . you have a certain sense of joy and fun communicating . . . whereas western apps focus more on pure functionality

– Le Hong Minh, chairman of VNG Corporation

Sales of smartphones in southeast Asia have surged in the past few years because of rising incomes and the advent of cheaper, often Chinese-made phones that sell for as little as $50.

Southeast Asians bought 44m smartphones in the 12 months to April, an increase of 60 per cent on the previous year, according to GfK, a market research group.

“Southeast Asia is like Korea three or four years ago,” says Lee Sir-goo, joint chief executive of KakaoTalk. “If you think about Korea, KakaoTalk really took off when these smartphone devices were first being sold [in large numbers].”

Like Samsung, Hyundai and other South Korean companies, KakaoTalk has been benefiting from the widespread popularity of South Korean music and TV shows in Asia.

Along with WeChat and Line, which is based in Japan but owned by NHN, a South Korean internet company, it tailors its marketing strategies in each of the big emerging Asian markets including India, Indonesia, the Philippines and Vietnam.

That is a markedly different approach than US-based Google and Facebook, which tend to eschew traditional TV and billboard advertising and localisation in favour of building homogenous global communication products such as email and instant messaging.

Mr Ranson says the rise of these Asian messaging apps shows the limits of the “one-size fits all” approach, even as Facebook hits back with its own enhanced messaging services.

“If you’re really serious about breaking into new markets, you need to customise and listen to local users,” he says. “But for a massive company like Facebook, it’s hard to listen to people in every country.”

Like all internet start-ups, KakaoTalk, Line and WeChat face their own challenges – from finding ways to monetise their soaring user base to ensuring they do not fall out of fashion as quickly as they rose.

The three apps are free to download and the companies say they are focusing on attracting new users rather than making profits at this early stage.

They are also keen to expand beyond the region. Line’s strongest markets are in Indonesia, Japan, Taiwan and Thailand but the app also has 10m users in Spain.

And the revenues are starting to flow, through sales of “stickers” – stylised icons for user profiles – and add-ons for free games.

Line reported revenue of Y5.82bn ($58.9m) in the first quarter of 2013 in its first public results, while KakaoTalk had its first profitable year last year, reporting revenue of $42m and a net profit of $6.5m.

Whichever companies survive and thrive, VNG’s Mr Minh believes the rapid initial success of KakaoTalk, Line and WeChat presages the emergence of Asian internet companies that will challenge the dominance of the US online pioneers.

“Western companies have tended to innovate earlier and faster due to their concentration of talent and an early market mass,” says Mr Minh, who built VNG from scratch. “But nowadays, Asian companies also have large markets of internet and smartphone users and they will in many cases out-innovate western companies.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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