Naver say Naver

After WhatsApp and Viber, buyers are circling around Japan’s messaging app Line

February 25, 2014
Obsession
Mobile Web
February 25, 2014

Japan’s SoftBank wants to buy some or all of Line, a wildly popular messaging app, Bloomberg reports. Line, which is based in Japan but is owned by South Korea’s Naver Corporation, has 360 million users worldwide, most of them in East Asia.

In 2013, Line’s full year revenues were $335 million, making it the highest for any non-game app in both Google and Apple app stores, according to App Annie, an analytics firm. WhatsApp, which Facebook bought last week for $19 billion, came in ninth on App Annie’s list. Earlier this month, Line reported earnings of ¥12.2 billion ($120 million) for the fourth quarter of 2013, up 550% over the previous year.

All of which makes Line an obviously attractive target, especially coming in the wake of two big messaging app deals in the past two weeks; Rakuten, another Japanese firm, acquired Viber on Valentine’s Day this year for what now seems like a bargain-basement price of $900 million. And then there’s Facebook’s $19 billion WhatsApp buy. BNP Paribas estimates that Line could be valued as high as $14.9 billion.

Yet Line is nothing like the two messaging apps that have gone before. The key feature of Viber, used by some 300 million people, is that it facilitates free phone calls, much like Skype. People rarely use it to send messages. WhatsApp’s focus has been entirely on making a simple, uncluttered app for people to send messages to friends and family.

Line, on the other hand, is crammed full with goodies. It is best known for its use of “stickers” or oversize emoticons that users can purchase and send to friends. But it derives more than half of its revenue from in-app games. Despite its ranking as the top non-game revenue maker, it is at heart a gaming company. SoftBank has some experience in this market, having acquired a majority stake in Finland’s SuperCell, maker of “Clash of Clans,” a popular mobile game. The Japanese telecom and internet company also owns a majority stake in GungHo Online Entertainment, maker of the successful “Puzzles and Dragons” game. Moreover, SoftBank also has experience with messaging apps through its joint venture with Bharti Airtel, BhartiSoftBank, which owns the Indian messaging app Hike. (Line, for its part, entered India last year and quickly signed up 10 million users.)

At least one other company has also shown an interest in acquiring a stake in Line, which is also reported to be planning an IPO. Line denied talks with SoftBank. “There’s no reason to sell a stake and no plan to sell,” a spokesperson told Reuters. With messaging apps in high demand at the moment, Line can afford to be pricey.

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