Brand Case Study / Line
When we featured Line as a brand spotlight in the magazine, we were impressed by how the Asian messaging app had become a tech powerhouse with 200 million users in just four years. Now, Line's impressive trajectory continues with the largest tech IPO of the year, valuing the company at around $8bn, with shares jumping 30% on opening.
In 2010, a small team based in Tokyo set out to design a new kind of service – one that would take advantage of the accelerating shift in web usage habits from PC to mobile. But as the three-person team began working on the brief, disaster struck. A magnitude-nine undersea earthquake shook north-eastern Japan, triggering a tsunami that devastated the nation. Thousands of people died, homes were ruined and cellular networks collapsed, meaning families couldn’t contact loved ones. In the wake of the tragedy, the team quickly looked for a way to help, and Line was born.
The earthquake’s devastation highlighted the fact that internet connections were actually much more resilient than mobile networks in emergency situations. So the team designed an app that people could use to communicate over the web. ‘Line was created to help these families find each other,’ says Jae Hyung Kim, head of strategy and operations for Line Euro-Americas. ‘Our core values are to help foster powerful connections for people during specific moments.’ In June 2011, just three months after the earthquake, the first version of the app launched in Japan.
The company has evolved into a messaging monster. ‘Our goal is to become a global communications service on a level with Facebook and Twitter,’ says Satoshi Yajima, Line’s senior manager of marketing communications.
Step aside, SMS /
As Line established itself in 2011, so did other messaging apps around the world. WeChat gained popularity in China, KakaoTalk in South Korea and, beyond Asia, people sent 1 billion messages per day on WhatsApp. Today, over-the-top messaging services (OTTs) have become the place where young people live on mobile – the go-to app, given pride of place on their homescreens (for more on the rise of messaging apps, see Contagious 40).
From the outset, the disruption was simple: WeChat, Line and WhatsApp all worked via the web, rather than cellular networks, so users could have richer conversations – longer messages, voice notes, emojis, photos, video, etc. – without the risk of racking up costly bills. ‘These apps were lucky enough to come along at the right time, when consumers were ready to evolve from SMS to a more sophisticated messaging application,’ says Neha Dharia, a senior analyst at consulting firm Ovum. But while Line was slowly developing a userbase in Japan, there was little to distinguish it from the other major OTT players. There was no unique selling proposition – until stickers came along.
Kill 'Em With Cuteness /
Hoping to build on the immense popularity of emojis in Japan, in October 2011 Line created stickers, a new visual language that eases communication and, incidentally, gave the brand the identity it needed. Think of stickers as super-sized emojis: instead of conveying a single emotion (i.e. a smile or a frown) they add personality to communications by expressing more complex scenes. A typical sticker might depict a character dressed up for a night out, walking the dog or doing homework. A pack of stickers may tell the story of a character’s holiday, date or day at work.
Stickers immediately resonated in Japan, where the pervasive love of kawaii culture (which delights in all things cute – such as Pokémon and Hello Kitty) and its character-based language, which makes it hard to quickly type messages on a mobile keyboard, created a receptive audience. Now, Line users send nearly 21,000 stickers every second, and that frequency will only increase as the app grows. ‘Looking ahead, our goal is for stickers to become a universal language. We want to develop sticker culture into a worldwide phenomenon,’ says Yajima.
The most popular stickers feature Line’s ‘Friends’ – a core cluster of animated creatures. The flagship characters are Brown (a bear) and Cony (a rabbit), who are dating (yup, really). They tend to come in packs of between eight and 40 stickers and tell mini-stories, like the duo’s ‘Thrilling Date’, which starts with Cony thrusting an ice cream into Brown’s face and ends with them having a pillow fight. Other characters include a round-faced man called Moon, a frog called Leonard, a chick called Sally and James, a ladies’ man.
These characters have become the visual manifestation of Line, the brand. You can buy cuddly toys of Brown, T-shirts featuring Sally and a Swarovski crystal-encrusted figurine of Cony, priced $3,300. There’s even a TV show called Line OFFLine Salaryman, which follows the daily difficulties of Moon as he works in the brand’s product design department. ‘Line has done a fantastic marketing job with its characters in Japan – the other chat apps don’t have any mascots like this’ says Dharia. (Although Tuzki, a cartoon rabbit, is now gaining popularity and recognition among WeChat users.) ‘Line catered for the Japanese market, knowing what would work there, and is now exporting this abroad.’
Eyeing Up Expansion /
Today Line is the leading messaging app in Japan, Taiwan and Thailand, and is focusing on becoming the top dog in other South-East Asian countries, such as Indonesia and Malaysia, as well as looking towards the Americas. The brand grows by identifying regions where organic use of the app has taken off and then concentrating its marketing efforts on raising awareness and driving further downloads in those
areas. Then it singles out countries where OTT messaging is already popular (i.e. where a rival is doing well) and highlights the superior user experience on its platform. WhatsApp, for example, was the market leader in Thailand before Line launched an aggressive push there.
Countries like the US, where telcos bundle thousands of free SMS messages into mobile deals, can be much harder to crack. ‘The challenge in the US is that messaging is free already, which means the obvious reason to adopt an alternative service isn’t there,’ explains Ben Thompson, a Taiwan-based industry expert and author of tech blog Stratechery. ‘So that’s the biggest thing to figure out – how do you overcome the delta between Line and SMS, which is much smaller than in other parts of the world where you’re paying for every message.’
In regions where Line faces stiff competition – from either SMS or from other messaging services like WeChat, Facebook Messenger, Snapchat or Kik – the company turns to stickers to win over new users. ‘Our biggest learning is that you have to be global and local at the same time,’ says Kim. So Cony and Brown stickers are often adapted on a country-by-country basis. In Islamic countries, Line circulates special packs celebrating Ramadan. In Western markets, a partnership with Disney means more familiar characters join Line’s Friends in the sticker store, such as Minnie Mouse, Donald Duck or Big Hero 6’s Baymax.
Like many brands, however, Line has learned that being truly local is most easily accomplished by enabling, well, the locals. The brand’s Creators Market lets anyone in the world design and sell stickers in the Line app, and the user-generated packs have been a boon for the platform. In its first six months, the Creators Market generated revenue of ¥3.59bn ($30m) from 270,000 creators in 145 different markets. Line splits sales fees with the creator 50/50 (after a 30% commission is deducted by Apple or Google), meaning that the most popular sticker packs have lined the artists’ pockets with more than ¥10m ($84,000) in less than six months.
Messenger to Mobile OS /
For Line, partnerships with brands are an integral part of the company’s future growth plans. ‘2014 was a truly decisive year,’ wrote Line’s former CEO, Akira Morikawa, in the company’s end-of-year results announcement. ‘We decided not to settle [for being] just a simple messenger app, but instead resolved to become the world leader in platform development.’ Specifically, Line’s future lies in building what Kim describes as a ‘platform around five key pillars’: communications, content, gaming, ecommerce and services. ‘Communications is always at the core for us, but if you think about the other things, a whole ecosystem can be built that helps people really live their lives,’ he says.
With this new ‘Life’ platform strategy, Line has the potential to solve one of the biggest issues facing users on mobile: discoverability. There are millions of apps available on smartphones today, but finding the ones that are relevant to you can be tricky (kind of like trying to find the right website on the internet, pre-Google). Because people use messaging platforms many times a day, these are in an optimal position to push new content suggestions to users. ‘The potential to turn messaging into a platform is the Trojan Horse that drives a lot of the excitement in the sector,’ wrote Benedict Evans, a mobile analyst at VC firm Andreessen Horowitz, in a recent blog post.
Selling + Services /
Having built this strong content offering, Line is now turning its attention to constructing a range of localised services. Services that will further increase a user’s reliance on the app in their day-to-day lives.
Line Pay is the foundation on which these new services are being built, and was released globally last December. It allows users to make secure payments through their smartphone, either from Line’s store or from other participating retailers, both online and in the real world. While Line hasn’t published any user figures, it’s clear that it faces stiff competition from other solutions, such as Apple Pay, though the fact Line Pay can run on iOS and Android could help to encourage growth.
In an effort to stand out from this crowd, Line is experimenting with services that rely on its in-app payments function. Line Taxi, which lets users hail and pay for a cab using Line Pay, is now in 23 of Japan’s 43 regions, or prefectures, and is reportedly making a dent in Uber’s growth efforts in Japan. In Thailand, Line has moved into online groceries, so customers can buy staples like coffee, water and noodles and have them delivered to their door free of charge. And, in a bid to enter the music-streaming marketplace, Line also acquired MixRadio from Microsoft last December. A new version of Line’s MixRadio, which already claims to have millions of users in 31 different countries, is expected to launch on both Android and iOS this year.
As well as offering up practical uses for Line Pay, these services provide a richer experience for users and, consequently, grow Line’s business. Justin Lee, an analyst at BNP Paribas in Seoul, thinks MixRadio will be essential to its expansion into Western markets, for example. ‘[Line] realised that it would need a different strategy from what effectively worked in Asian countries – i.e. promoting through characters, stickers and games,’ he says. ‘This is why Line is planning to launch the improved version of MixRadio, targeting Europe and the US.’
An investment fund of ¥5bn ($417,000), called Line Life Global Gateway, has been established to encourage third parties to create innovative services that will further help Line grow. Support is focused on five key areas: offline-to-online, ecommerce, payments, media and entertainment. This, the company hopes, should help bolster its offering in the lead-up to a probable IPO. ‘We expect the company to push for the deal in the second half of 2015,’ says Lee, who values it at just shy of $16bn.
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