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Asian Companies Battle US Companies in Social Messaging War

Giving a new acquaintance your phone number so you can text each other is soon to be a relic of the past. It is now much easier to communicate using social media apps, where users can create group chats, send media files, and even call each other just by using a Wi-Fi connection.1 Exactly why consumers have not forgone texting altogether probably has something to do with the sheer number of social messaging apps available to choose from – with no one app having clear domination over the market.

The United States has WhatsApp – the service boasting over 400 million monthly users2 that was acquired by Facebook in February for $19 billion.3 Charging users $1 per year, with the first year free, WhatsApp brings in essentially no profit to Facebook. Instead the goal seems to be acquiring users first, lock down the market for social messaging, and then worry about profit later.4 WhatsApp may be the dominant force in the United States for social messaging, but it has fierce competition coming in from East Asia and has an uphill battle to break into the Asian market at all.

Viber – a social messaging service that has already been competing in the US market with WhatsApp – found a new home this year in the Japanese e-commerce company Rakuten. The purchase, for a modest $900 million, allows the Japanese company to buy its way right into the battle for the US market rather than trying to break its way in from outside. Viber has roughly 300 million users, and Rakuten’s other service users will give the company over 500 million users worldwide.5

In China, the mega-company Tencent’s WeChat social messaging app is rapidly picking up users – and profits. WeChat has reached over 300 million users world-wide, with over 70 million of those outside of China.6 The service has started bringing in profits for Tencent within the past year, but a valuation for the service is still speculation at this point; not helped by the mysterious metric used to value WhatsApp during the Facebook purchase.7 Whether WeChat will continue to grow outside of China remains to be seen. The company has already faced criticism not only for its eagerness to censor user’s messages within China, but for its inadvertent censorship of messages sent and received outside of China due to the servers being based in China.8

The biggest rival to WhatsApp for the US market, and WhatsApp’s goliath outside of the US, is NHN Japan’s Line. NHN Japan, a subsidiary of South Korean giant Naver Corporation, developed Line in 2011.9 The service, which has over 430 million users globally, has one distinct advantage for the Naver Corporation – it is actually generating profits. With revenue of over $500 million last year10 Line does not charge users to download or use the service, instead opting to offer in-app purchases. The company sells users “stickers” that, once downloaded, are permanently tied that that user’s account and can be sent to friends to friends. A friend’s birthday? Send a sticker of a bunny with a cake. Can’t go to the party because you are too busy? Send a sticker of a person crying in a corner. These stickers have proved to be a perfect fit for the Japanese market; which is not only enamored by cute mascot characters, but which functions using a language that often demands indirect and tedious responses to requests and questions.11

The huge success of Line has prompted a lot of discussion regarding when and where – Tokyo or New York – Line will offer its initial public offering (IPO). Estimated to bring in between $10-20 billion, the IPO has filed to be listed on both the Tokyo Stock Exchange and the New York Stock Exchange and investors wait to see where it will end up.12 Regardless of whether the company ends up listing in the United States or not, it does not appear to be giving up on taking the US market – despite scaling back efforts to do so when they were not seeing as many gains as they had hoped. The company has partnered with New York venture fund “Collaborative Fund” to allow Line to purchase small stakes in American companies13 and will likely renew expansion efforts once it goes public.


  1. See Hiroko Tabuchi, No Time to Text? Say It With Stickers, N.Y. Times, May 26, 2014, at B1, available at http://www.nytimes.com/2014/05/26/technology/no-time-to-text-apps-turn-to-stickers.html&assetType=nyt_now?gwh=7C7B913684EC1C1946D945EA37A7DFD8&gwt=pay&aaassetTy=nyt_now. 

  2. Hiroko Tabuchi, As War for Web Messaging Users Grows, Rakuten Buys Viber for $900 Million, N.Y. Times, Feb. 15, 2014, at B3, available at http://dealbook.nytimes.com/2014/02/14/rakutenjapanese-e-commerce-giant-to-buy-viber-for-900-million/. 

  3. David Gelles, For Facebook, It’s Users First and Profits Later, N.Y. Times, Feb. 21, 2014, at A1, available at http://dealbook.nytimes.com/2014/02/20/for-facebook-its-users-first-and-profits-later/. 

  4. See Id. 

  5. Tabuchi, supra note 2. 

  6. See Sabrina, Wechat Oversea User Hit 70 Million, Hired Messi for Global Ad Promotion, China Internet Watch (July 9, 2013), http://www.chinainternetwatch.com/2582/wechat-oversea-user-hit-70-million-hired-messi-for-global-ad-promotion/. 

  7. See Robyn Mak, WeChat Valuation Is Still Just a Hunch, New York Times Dealbook (March 20, 2014), http://dealbook.nytimes.com/2014/03/20/wechat-valuation-is-still-just-a-hunch/?module=Search&mabReward=relbias%3Aw. 

  8. See Steven Millward, Now China’s WeChat App is Censoring Users Globally, Tech In Asia (Jan. 10, 2013), http://www.techinasia.com/china-wechat-censoring-users-globally/. 

  9. Akky Akimoto, Japan’s LINE Social Network Could Challenge Global Competitors, Japan Times (July 16, 2012), http://www.japantimes.co.jp/life/2012/07/18/life/japans-line-social-network-could-challenge-global-competitors/#.VB74ORawT_R.  

  10. See Mark Scott, I.P.O. Plans, N.Y. Times, July 17, 2014, at B10, available at http://dealbook.nytimes.com/2014/07/16/messaging-app-line-files-for-i-p-o-in-tokyo/. 

  11. See Tabuchi, supra note 1. 

  12. See Mark Schreiber, Line Fends Off Fury Ahead of Lucrative IPO, Japan Times (Sep. 6, 2014), http://www.japantimes.co.jp/news/2014/09/06/national/media-national/line-fends-fury-ahead-lucrative-ipo/#.VB74OxawT_R (Speculating IPO price at $10 Billion). See also Reuters Business, WhatsApp Rival Line Could Revive Tokyo Exchange With IPO, New York Times (July 25, 2014), http://www.nytimes.com/video/multimedia/100000003020514/whatsapp-rival-line-could-revive-tokyo-exchange-with-ipo.html (Speculating IPO price at $20 Billion). 

  13. See William Alden, Line, a Japanese Messaging Service, Teams With New York Venture Fund, New York Times Dealbook (July 18, 2014), http://dealbook.nytimes.com/2014/07/18/line-of-japan-teams-with-new-york-venture-fund-to-make-investments/. 

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Jesse Taylor

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