Line may have hit peak stickers

Those stickers aren’t doing the job any more.
Those stickers aren’t doing the job any more.
Image: Reuters/Yuya Shino
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The messaging platform Line reported disappointing third-quarter earnings (pdf) yesterday (Oct. 26), and its stock dropped 5.7% as a result. It is struggling to grow its user base beyond its traditional markets, and its current users aren’t turning to the app as frequently for its most popular activity: sending digital stickers.

Line had the year’s biggest tech IPO, raising more than $1 billion in July, on the back of selling cutesy stickers to its users. But that engine of growth may be running out of fuel—Line may have entered an era of peak stickers.

Here’s the volume of stickers Line users sent each day on average:

And here’s how that’s hitting Line’s top line:

Line may have pioneered the model of turning stickers into cash, Apple and others have also got in the sticker game. Users of Apple’s iMessage have been able to buy sticker packs since September. There are already thousands of sticker packs available, and users are lapping them up. Downloads of a Hello Kitty game rose by 15 times, thanks to a sticker pack that it offered for free, according to the app analytics firm Sensor Tower.

The effect of Line’s stickers losing their adhesion to users can be seen elsewhere in the company’s earnings. It makes about 20% of its revenue from stickers, and 33% from advertising. About two-thirds of that advertising money is from “messenger ads,” which include stickers sponsored by brands. That measure has also stayed flat for the quarter, at ¥8.3 billion, the same as the previous quarter. It has grown about 14% compared to a year earlier.

Revenue for the quarter fell 5.5% to ¥36 billion ($344 million) compared to the previous quarter. It was up 12.7% compared to a year earlier. The user-growth picture isn’t pretty, either. The platform’s monthly active users (MAUs) for the third quarter was 220 million, or unchanged from the last quarter. It’s up just 3.5% compared to a year ago.

Some parts of Line’s business are paying off. Its “performance ads” segment, which offers programmatic ads in the chat app, hit ¥3.6 billion this quarter, nearly doubling its revenue contribution compared to the previous quarter. It’s picking up some of the slack from the effects of sticker saturation.

It’s also continuing to eke out growth from its four biggest markets by user base: Japan, Taiwan, Indonesia, and Thailand. Monthly actives from those countries stand at 162 million, up 3% from a quarter ago, and an increase of 17% from a year ago. While Japan makes up about 40% of those users, Line will look to Indonesia for future growth. The country has 126 million smartphone users, according to industry body GSMA, and their numbers are growing rapidly.