The North East Asian social network landscape is very unique — basically, a different platform dominate in every country. For Japan, that is LINE with 70+ million Monthly Average Users (MAU), about 55% of the total population, over 70% of which are active daily (LINE has an additional 100 million MAUs outside of Japan, mostly in Indonesia, Taiwan and Thailand). LINE’s secret to success is that it has a much wider reach than any of the other social networks, and is the primary communication tool for many families, across generations, all the way from grandparents to grandkids, as presented by Shinichiro Isago, LINE Evangelist at the recently held Italian Innovation Day Tokyo. In fact, the over 40 years old make up about 45% of LINE’s user base, and professionals count for approximately half, equal to homemakers, part-time workers, students, etc.
Taking a quick look at the near abroad, KakaoTalk dominates in Korea to an even greater extent than LINE does in Japan, being installed on almost 95% of smartphones. WeChat rules in China with an incredible 98% usage rate, and Facebook in Taiwan with close to 95%. So if you are looking at social network marketing across the region, you have your work cut out for you.
While dominant on the smartphone, LINE has some challenges to overcome when reaching into the home with its Clova lineup of voice-activated assistants, in particular the significant lead that Amazon has built globally with its Amazon Echo & Alexa offering.
Clova is only of the new businesses that LINE is developing. For the current fiscal year, ending in December 2018, the company has started separating out its core and new businesses from a financial reporting perspective. While the core businesses, like advertising and content on the messaging platform, are expected to make an operating profit of nearly JPY 43 billion, new businesses are forecast to incur a JPY 30 billion operating loss.
LINE is also rapidly developing its FinTech business in collaboration with Nomura Holdings and Sompo Nippon Japan Nipponkoa Insurance. LINE Pay depends heavily on prepaid cards, which require high customer rewards. On its April conference call, the company noted it is still far off from introducing QR code payments. Based on a company announcement from January 2018, LINE Pay is expected to be expanded to let users exchange digital currencies and use other financial services within the app. At the time, this was promoted as LINE creating its own cryptocurrency exchange, an effort that is no doubt stuck in the regulatory approval pipeline that we described in our recent “Japan Crypto Exchange Update”. From a valuation perspective, such functionality will be an important step for additional user acquisition if Revolut’s experience can be taken as a comparison, where the user base jumped 70% after the introduction of cryptocurrencies on the platform, and allowed Revolut to unseat TransferWise as the leader in Europe.