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Ovum Comment: Line IPO signals next level of chat wars

Japanese messaging app Line provider, Line Corp has filed for an initial public offering (IPO) at the Tokyo Stock Exchange. Line has applied for the IPO to be valued at 10 trillion Yen (approximately US$9.8 billion).


Line, a mobile messaging platform, offers free text and voice messaging, voice calling and group chat. It comes integrated with various interactive elements such as Stickers, Timeline and Official Accounts. Since its release in June 2011, the cross-platform mobile messenger has been releasing a series of add-on apps that range from games to an anti-virus app.

Line claims that it has become a “hot cultural icon” with 470 million users in 230 countries. Line has also held the coveted No. 1 spot in the “free apps” category of app stores in 60 countries, it said.

Controlled by South Korea’s Naver Corp., Line plans to appoint Nomura Holdings Inc. as a lead underwriter for the share sale, according to news reports. It is working with Nomura and Morgan Stanley (MS) to prepare for an IPO as soon as November, and is considering a listing on the Tokyo bourse and either the New York Stock Exchange or Nasdaq.

Neha Dharia, Senior Analyst at Ovum comments:

It has been an eventful year for the messaging industry, the consolidation in the market (Facebook’s WhatsApp acquisition and Rakuten’s Viber acquisition) allowed both WhatsApp and Viber to concentrate on building the product and user base rather than worry about funding. Along with this, chat app Tango has just got a Series D US$285 million round of funding led by China’s Alibaba; this leaves them with a lot more resources to spend on growing their footprint and product.  This signals the next level in chat app war that is taking place, one that goes beyond geographical expansion to one focused on monetization, quality of service and product features.

The messaging space is may not be as crowded as before, but there will now be a greater emphasis on quality of service, product offerings and of course monetization. Product innovation will be a strong differentiating factor at this level of chat app competition. Line seems to have understood this change in the market and its IPO move makes perfect sense given the recent activities in the industry. The IPO application is said to be valued at 10 trillion Yen, and would provide Line with the resources and recognition it needs to compete in the next level of chat wars.

An IPO will not only raise its profile further in the market, but it will also provide them with adequate funds to strengthen their product offering and grow their multiple healthy revenue streams which include games, stickers, e-commerce, content and so on.

Unlike most other players Line is already a revenue generating chat app focused on innovation, the IPO will not only help them get further visibility in markets outside Asia, but the resources can also be put to further marketing efforts and product innovation to grow their user base internationally.

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