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Messaging-App Maker Line Plans China Expansion

Messaging-App Maker Line Plans China Expansion

Looks to Establish Local Team to Develop Content, Features for World’s Largest Mobile Market

LORRAINE LUK

Updated June 13, 2014 1:40 a.m. ET

Japan’s smartphone messaging app Line has more than 400 million registered users around the world and is looking to China to add to that base. The WSJ’s Yun-Hee Kim speaks with Line’s Hyunbin Kang, Head of Business Development, in Shanghai.

SHANGHAI—After two years of study, mobile-messaging-app maker Line Corp. plans to expand in China later this year by establishing a local team to develop content and features to further tap the world’s largest mobile market.

“China is a very strategic and interesting market as it will have hundreds of millions of new smartphone users in the coming two years,” Line’s head of business development Hyunbin Kang told The Wall Street Journal. “China is our target market.”

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Speaking on the sidelines of the Mobile Asia Expo, Mr. Kang declined to disclose the number of Chinese employees the company plans to hire, but said a local team will focus on communications with users and developing localized services.

Line, a Japan-based unit of South Korean Internet portal operator Naver Corp.035420.SE -1.26% , provides free text messaging over smartphones and is known for cutesy emoticons like the pink-cheeked, smiley-faced character Moon. Launched in 2011, it has won more than 400 million registered users world-wide and competes with WhatsApp—being bought by Facebook Inc. for $19 billion—and China’s WeChat,TCEHY -0.67% operated by Internet giant Tencent Holdings Ltd.

Line’s diversified services have helped it generate revenue through sales of products such as virtual items for mobile games and digital stickers. Its sales of $5.1 billion last year compare with an estimated $20 million for WhatsApp. The company is considering listing its shares in Tokyo as early as this autumn, a person familiar with the company’s plan said earlier this month, raising money to help fund its overseas ambitions.

Mr. Kang declined to comment on a potential listing.

Analysts say it won’t be easy pushing into China, where WeChat’s more than 300 million monthly active users give it a dominant position.

“WeChat has achieved a critical mass and is benefiting from the network effects that come with its early-mover advantage. Everyone you know is on WeChat, so why switch?” said IDC analyst Shiv Putcha.

Line’s interest in China dates back to late 2012 when it started studying local consumer preferences and the industry landscape, Mr. Kang said. It plans to expand there by rolling out large-scale promotions and customized services for Chinese users. Mr. Kang said he believes that interaction with Chinese users will be key to cracking the market. The company plans to launch what it calls a creator’s market there, allowing users to design their own stickers, with Line sharing revenue from the sales.

He said Line also plans to offer unique features to lure users in China. For example, to take advantage of the popularity of Korean entertainment there, the company has also promoted the Line smartphone app through a TV drama featuring popular Korean celebrities using the app as their main means of communications.

“The download of Line in China has increased significantly after the TV drama was shown as users want to share the emotional feelings of the Korean celebrities,” said Mr. Kang. He said the company’s customized stickers for this popular Korean TV drama have also helped attract users in China, though he declined to give specific figures.

China offers great growth potential, but the scattered content and distribution channels Line must collaborate with to promote its services and foster user loyalty do present a challenge, said Mr. Kang. Marketing activities in China will likely be different from those in markets such as Mexico and Taiwan, where Line has used localized TV commercials to promote its brand, he said

Line has 17 million registered users in Taiwan and 10 million users in Mexico.

“TV commercials may not work well in China as Chinese consumers tend to watch more videos on the Internet,” said Mr. Kang. “So we plan to promote our brand through sponsoring Web-based dramas and video clips on popular video sites in China.”

In China, Line has a localized version of the app called Lianwo—”connect to me” in Chinese.

“Lianwo has been optimized to serve the local environment in accordance with the mainland China’s standards, which does not affect the global service of Line,” said Mr. Kang, “Line will stay committed to providing a stable and secure mobile platform that maintains a global level of security standards.”

Mr. Kang also said the company will expand mobile shopping beyond Japan to other Asian markets later this year, but declined to provide more specifics. As part of its efforts to generate more revenue from mobile commerce, he said, the company plans to beef up its payment services to ensure a better shopping experience.

Line is also open to acquisitions to expand its operations, Mr. Kang said.

Write to Lorraine Luk at lorraine.luk@wsj.com

 

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KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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