While You Were Chasing Pokémon, Line Had a $1.3 Billion IPO

Why Messaging App Line Will Drive Mobile Innovation for Brands

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Amid all the hype around Pokémon Go, you may have missed another huge technology story emerging from Asia. Line, a messaging app with approximately 218 million monthly active users in the Far East, recently raised more than $1.3 billion in 2016's largest tech IPO.

Line Corp. rings the NYSE Opening Bell to celebrate its IPO day.
Line Corp. rings the NYSE Opening Bell to celebrate its IPO day. Credit: NYSE

With the company now valued at over $8 billion dollars, Line is quickly becoming a major technology player that can advance and influence mobile and app innovation alongside U.S. players like Google, Apple and Facebook.

So why is this important?

Asia has long been an early bellwether for technology trends that go on to be widely adopted globally -- simply look no further than emojis. Taking a closer look at Line and its success can give us insight into where mobile innovation might go next, and how brands can stay ahead of the curve.

Here are three areas Line is investing in that could influence the next wave of mobile innovation, uncovering new territory for brands:

1. Line has generated more than $1 billion in sales.

The easiest way to describe Line is Japan's answer to WhatsApp. But that's a little misleading. WhatsApp, which was acquired by Facebook in 2014, is a chat platform that has a massive audience but doesn't currently have a clear monetization strategy. Line is a messaging interface that has been able to monetize through commerce: mobile games, "sticker packs" (think custom emojis, using proprietary intellectual property), and even a wholly-owned Uber competitor.

Many experts predict we are moving away from a world where we use separate apps for separate needs, and toward a world where we can purchase goods and services directly from messaging interfaces -- and Line is a leader in making this a reality. That's why work productivity platform Slack is generating such excitement, and why Google announced not one, but two new messaging products (Allo and Duo) at I/O this year. Meanwhile, Facebook is investing heavily in artificial intelligence for its Messenger product, introducing features like enabling bots to respond to user queries in a conversational style.

Line generated more than $1 billion in revenue in 2015, only 30% of which came from advertising, according to TechinAsia. The strength of the company's ability to drive sales in-app demonstrates the ability to turn an app with high engagement into a platform that can be monetized in ways beyond advertising.

2. Line puts a bigger investment behind Android app development.

In addition to its core business, Line is developing its own ecosystem of Android apps: Line Pay, Line Taxi, Line Music and Line TV, among others. All of them can be downloaded directly from the messaging interface. While these services currently account for only a fraction of Line's revenue, the company is clearly making a bet on the importance of owning the ecosystem.

What's even more important is what Naver Corp., Line's parent company, is up to. As Korea's largest search company, it has partnered with the country's three major telecommunications companies to develop an Android app store. OneStore, as it is called, has an initial user base of 30 million users, or 60% of Korea's entire population. If it succeeds, we could see consolidation of local Android app stores become the norm globally, which would shake up the App Store versus Google Play duality we have become accustomed to in the U.S.

The growth of regional Android app stores that offer serious scale to match Google Play will require marketers to build new relationships. While this presents a near-term challenge, it could create a long-term opportunity to connect more intensely with consumers in local markets, by marketing to them on culturally relevant platforms that understand them deeply.

3. Tech companies are finding new value (and audiences) in old IP.

The most significant revenue stream for Line is mobile gaming and stickers, which accounted for 40% of the company's 2015 revenues. Historically, Line has created games using only its own intellectual property (IP) -- i.e., the cute characters that also underpin its sticker business. However, late last year Line announced a partnership with Sega, a sleeping giant of console gaming, with popular franchises like "Sonic the Hedgehog." Under the agreement, Line will market and distribute games on its platform, while Sega will develop and publish them.

What made Pokémon Go succeed was the combination of Nintendo's closely-guarded Pokémon franchise with augmented reality technology that had been in market for years. It's the first time Nintendo has ever let any Pokémon IP live outside one of its wholly-owned platforms, and it has led to massive and immediate mobile success. Similarly, Lego Dimensions has mashed up a major toy franchise with popular Warner Bros. movie IP to find success in the toys-to-life category.

The resurgence of old IP can breathe new life into technology, mobile and app-based platforms in fresh and unexpected ways. Line's investment in this space is a leading indicator that this trend will continue.

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