TALK ABOUT CHAT

Line’s CEO is betting on bots to help the messaging company finally IPO

Obsession
Messaging
Obsession
Messaging

Facebook’s announcement in January that it would introduce “bots” in its Messenger chat app sparked a new trend in the tech industry. Investors have begun pouring money into startups specializing in the artificial intelligence-powered software, which can order movie tickets and plan users’ calendars. Microsoft CEO Satya Nadella said in March that “bots are the new apps.”

For Facebook, Microsoft, and legions of startups, bots are pie-in-the-sky bets on new technology. But for Japan’s messaging app Line, which recently announced developers can create their own bots in the app, they’re more like a desperate attempt to increase engagement, ahead of the company’s planned IPO.

“There will be more and more bots present, and we are going to export them aggressively,” said Line CEO Takeshi Idezawa said at the Tech in Asia Singapore conference on April 11. “Anything with bots we think will give us a higher user rate,” he added.

Line needs more engagement from users, badly, as it makes a second attempt at an IPO that could come this summer. Its end of December total was just 217 million, a 14% increase from 190 million it had a year prior, but hardly the type of annual leap investors want to see in a free chat app.

Line’s revenues jumped from $656 million in 2014 to $1.02 billion in 2015, impressive growth for the year. But quarter-on-quarter revenues aren’t actually growing.

WhatsApp became the world’s biggest chat app by being one of the first. Facebook Messenger relies on its ties to Facebook’s social network. Line tried to compete with advertising, paying for billboard and TV placements all over the world, including Spain and Latin America, where WhatsApp was already dominant.

But that strategy failed, and the company is now focused on being the most-used app in its four core markets—Japan, Taiwan, Thailand, and Indonesia. “In any country and in any new market, the aim is to become application number one. Otherwise there is no reason to go there,” Idezawa told Quartz.

New products have had mixed results so far. Idezawa says TV app is a hit in Japan, but it shut down its e-commerce marketplace app in Japan, one year after its launch. An offline payments service hasn’t been that poplar.

The company needs new revenue sources if it indeed plans to IPO, Serkan Toto, a mobile games analyst based in Tokyo, told Quartz. Line makes 41% of its revenues from games, 24% from sticker sales and the rest from ads.

Because Line is viewed as a “primarily Asian app,” it limits the company’s potential maximum revenue in investors’ eyes, says Toto. Many of Line’s new products have been “concerned with problems that have been solved before, especially in advanced countries like Japan,” he said, like mobile payments and e-commerce.

Idezawa is bullish on bots. He cites a Dominos pizza delivery unit that made an extra 100 million yen ($923,929) for itself testing a bot as an example of their potential. Line makes money by placing the bots in official accounts for businesses, which cost money to operate.

If Line’s IPO does indeed happen this summer, the tech industry will be thrilled—after all, there will finally be a public valuation for messaging apps. At the conference, though, Idezawa declined to comment on the company’s IPO plans. Given the company’s listing was originally planned for 2014, it may be a long wait.

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