Last Saturday, a couple of days after Facebook announced that it would purchase the messaging app WhatsApp for nineteen billion dollars, the servers that allow WhatsApp’s four hundred and sixty-five million global users to exchange mobile messages buckled, and for two hundred and ten minutes the service was down. In the fiercely competitive world of social-messaging apps, three and a half hours is enough time to do some damage. In the day after WhatsApp’s server outage, its biggest competitors, Telegram and Line, gained five million and two million new users, respectively. The shakeup illustrates the vulnerability of Facebook’s new service in a fickle, competitive marketplace: if you do only one thing for your customers, they can be unforgiving if you screw it up—especially if yours is a service that they can get elsewhere.
Telegram, which is essentially a WhatsApp clone, has received a lot of attention since the WhatsApp outage, but Line, which isn’t as well known in the U.S., is perhaps more interesting. Unlike WhatsApp, which has a simple interface, Line has built a loyal following by offering a more complex social-messaging service that allows users to exchange messages, play games, give status updates, and send digital stickers, photos, or short videos to friends. It was founded in June, 2011, and now has more than three hundred and sixty million users worldwide. In 2013, the analytics firm App Annie ranked it first in global sales of non-game iOS and Android apps.
Thanks to these non-messaging services, Line makes money, and lots of it. In 2013, the app generated more than three hundred and thirty million dollars in revenue for its parent company, the South Korea-based NHN Corporation, according to an earnings report. (WhatsApp made twenty million dollars in that period; Telegram, backed by the Russian millionaire Pavel Durov, is run by a nonprofit.) Sixty per cent of Line’s 2013 revenue came from selling gaming extras, like special powers or bonus levels to players of its popular free games Line Pop, Line Bubble, and Line Party Run. (In the games, players help their favorite Line characters collect candies, dodge obstacles, and “retrieve the stolen treasure from the boss.”) Another twenty per cent of Line’s 2013 revenue came from digital stickers, which are known as “stamps” to the legions of Japanese obsessed with the kawaii (cute) images. Some are free, while others cost a hundred and seventy yen (about $1.70) for a pack of forty. The characters include Brown, an adorable C.E.O. bear, and Cony, a rabbit intern; users can send them to friends to express a range of emotions—love, exhaustion, excitement, flatulence. At Line’s headquarters, on the twenty-seventh floor of an office building in Tokyo’s trendy Shibuya neighborhood, the rooms are filled with giant, stuffed versions of Brown, Cony, and others.
In Japan, these characters have a practical appeal beyond their cuteness. They can help users express a range of thoughts and emotions quickly, without resorting to one of the Japanese language’s three written alphabets. This is particularly appealing for commuters on tightly packed trains who may simply want to send a kiss to their partner or decline a dinner invitation, citing exhaustion. (The Japanese language has a word—karōshi—for death from overwork.) Line’s expressiveness is a key to its success, according to Nobuyuki Hayashi, a Japanese author and I.T.-industry analyst. He believes that these characters can translate into success abroad for Line, not only in Asian countries like Taiwan and Thailand, where the app is already a dominant force, but also in European countries that have a long history of importing Japanese art, animation, and culture.
Line has faced challenges getting started in the U.S., where it only recently surpassed ten million users, and where it faces two big rivals in WhatsApp and Telegram. Both have deep-pocketed backers, and neither has yet shown interest in making money, which allows them to focus on growth. Line will have to figure out how to translate its characters, games, and stickers into an experience that more Americans want, but its enviable engagement in Asia—in Japan, Thailand, and Taiwan, more than eighty per cent of Line users are active every day, compared with Facebook’s sixty-one-per-cent daily engagement rate in the U.S.—could help it develop the kind of customer loyalty that would keep users from jumping ship after a short server outage.
The messaging service has another thing in common with WhatsApp, besides a lot of users: a big valuation. BNP Paribas S.A. recently valued Line at nearly fifteen billion dollars—not much lower than what Facebook spent to buy WhatsApp. A Line spokeswoman would not comment on a Reuters report that it may go public this year, but denied a Bloomberg story that claimed the Japanese telecom giant SoftBank was in talks with Line about purchasing a stake in the company. Meanwhile, at a Tokyo showcase on Wednesday, company executives unveiled a host of ambitious new ventures, including a service for businesses. The company also announced some new consumer features: a marketplace for user-created stickers and a voice-calling service, similar to Skype, that allows users to call landlines and cell phones. Voice calling is also, incidentally, the first feature that Facebook plans to add to WhatsApp.
Photograph: Brent Lewin/Bloomberg/Getty
Joshua Hunt
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