SADACHIKA WATANABE and YUKI NAGANAWA, Nikkei staff writers
JAKARTA/TOKYO -- There's growth, and then there's Line's kind of growth.
Line Corp., which operates the free voice and text app, held a countdown event on Nov. 25 as the number of registered Line users approached the 300 million mark. Employees at the company's head office in Shibuya, Tokyo, gazed at a large screen whose rapidly increasing numbers indicated the app's subscribers around the world. Their excitement barely had time to build -- the event started at 2:30 p.m., and just six minutes later, the milestone had been reached.
Although the company's officials had anticipated a rapid expansion of the app's user base, it hit 300 million earlier than even they had expected. After the figure surpassed 100 million in January 2013, it began soaring at an even faster pace, reaching 200 million in July and 300 million in November. CEO Akira Morikawa is bullish, saying, "Next year's target is 500 million."
That is an especially ambitious goal considering Line's competition in the coveted Southeast Asian market: WeChat, offered by China's largest Internet company Tencent Holdings, and KakaoTalk of South Korea, both of which have strong domestic followings of their own.
Strong in Thailand
Line has grabbed attention as a messaging tool capable of replacing smartphones' conventional texting function. Users chat by sending short messages and can view past conversations in a continuous stream. The availability of "stamps," a wide range of stylized icons such as those of popular cartoon characters, has played a key role in fueling the popularity of Line.
Line's user base has expanded explosively along with the spread of smartphones. After quickly commanding a sizable market share in Japan, the number of Line users there -- about 50 million at present -- has continued climbing only slowly. But Line has high hopes that markets in other nations will be able to pick up the slack.
Thailand currently tops the list of such countries with 20 million users as of Nov. 25, the most for any country outside of Japan. Partly thanks to a dearth of rival chat apps, Line has quickly expanded in Thailand after entering the market in 2011. Its TV advertisements, consisting of emotion-stirring stories popular with Thai audiences, have also helped to steadily raise the app's profile. So far, about 40% of Thai smartphone users having registered for the app.
The popularity of Line has also caught the attention of businesses. Japanese companies operating in Thailand, for example, have been enhancing their advertising with Line. Major Japanese retailer Aeon's financial subsidiary in Thailand, Aeon Thana Sinsap, has distributed free stamps to 5 million Line users so far in a bid to increase the membership of its credit card. Kasikornbank, a leading Thai bank, sends messages about campaigns once a day to Line users who have registered as friends of the bank, providing them free stamps in return.
Eyes on Indonesia
In foreign markets other than Thailand, however, Line is having trouble pulling ahead of the pack. "Competition is fierce in non-Japanese Asian markets. I feel the race in highly populous Indonesia is especially harsh," Morikawa said.
The member countries of the Association of Southeast Asian Nations, whose total population is 600 million, are proving to be the main battlefront in this fight. The big prize is Indonesia and its population of 240 million.
At a sprawling shopping mall in Jakarta, Line has been staging a Christmas promotional event with its mascot, a bear named Brown. In the mall's atrium, families can pose for photos with a nearly two-story tall version of Brown, and stuffed animals, dolls and other goods are on sale nearby.
TV commercials aired since the beginning of 2013 and updated 10 times since February have also contributed to the app's inroads into the market. The number of Indonesian Line users has already exceeded 14 million.
In July, which for Muslims marked the start of a month of fasting for Ramadan, Line users in Indonesia received messages in Indonesian language saying, "It is now Ramadan. You can download special stamps free of charge during this period." After Ramadan ended in August, the company gave away highly sought-after Galaxy S4 smartphones from South Korea's Samsung Electronics to 100 Indonesian Line users.
Kakao, the South Korean company offering the KakaoTalk app, has also been advertising on Indonesian TV and other media since April, signing up South Korean band Big Bang and popular Indonesian fashion models to appear in its ads.
In its home market, Kakao does not advertise on TV or through other mass media. In Indonesia, however, the company sees promotion of this sort as essential to raising the profile of its service. Kakao has teamed up with major local movie theaters and online shopping malls to offer discounts to users, and it has also mounted a joint sales promotion for smartphones with LG Electronics of South Korea.
China's Tencent, which runs the WeChat service, is also going on the offensive in Indonesia, setting up a joint venture in Jakarta with Indonesia's biggest private-sector broadcaster, Global Mediacom. Media conglomerate Global handles not only broadcasting but also online shopping and other Internet businesses, and the Indonesian company will work with WeChat to develop games and other products, as well as TV commercials.
Riding the smartphone wave
Both Line and KakaoTalk witnessed their user numbers in Vietnam cross the 1 million threshold early 2013, and the two are now engaged in a fierce advertising campaign using billboards and TV ads.
The operator of KakaoTalk currently regards four Southeast Asian countries -- Indonesia, Vietnam, Malaysia and the Philippines -- and Japan as its target markets. The company has dispatched 10 headquarters staff to the Southeast Asian nations and plans to further increase the number of local employees. With more than 120 million subscribers worldwide, KakaoTalk is miles ahead of other South Korean companies in terms of customer base, but it still lags far behind Line and its 300 million users. Kakao's strategy is to boost its share of specific markets by concentrating the bulk of its efforts in those areas.
To make up for its relatively small size, Kakao partners with other information-technology firms to raise the name recognition of KakaoTalk and beef up the contents of the app. In Southeast Asia, it has been actively tying up with local illustrators to create emoji chat icons. The company also intends to form business alliances with local app developers and other IT firms in 2014. Referring to competition with Line and other rivals, Lee Sirgoo, co-CEO of Kakao, said: "Our company is small in size and lacks funds, so we need to make a decision more quickly and do everything we can do."
Behind the three companies' aggressive jockeying lies the rapidly expanding smartphone market. According to research firm GfK, 42.2 million smartphones were sold in seven Asean countries, including Singapore, Malaysia and Cambodia, in the year to March 2013, an increase of 60% from a year earlier. However, the penetration rate for smartphones is still low in the region, and demand for the device is expected to grow steadily with the expansion of a middle class with purchasing power. The chat app operators are each hoping to be in the best position when the smartphone market truly takes off.
Gearing up in India
India currently has about 70 million smartphone users. With its 900 million conventional mobile phone users likely to switch to smartphones in years to come, the battle for the chat app market there is just getting started.
Competition is already harsh. In the English-speaking country, U.S. mobile messaging app WhatsApp and China's WeChat already have about 30 million users each, and Line broke into the market in July.
Aiming at courting young people, Line has blanketed TV networks with its commercials, such as one in which a student who belongs to a drama club uses the app to rehearse and another in which university students use Line stamps to play a game in class. The commercials were designed to give a powerful message of enjoying "a casual way of life with Line." Line reached 5 million users within only three weeks of its launch in the country. That figure climbed past 10 million three months later, as low-cost smartphones rapidly gained in popularity.
Tencent, which operates WeChat out of Guangdong Province, China, hires the most popular local singers and pop stars for its advertising in India, Taiwan and other Asian nations. In India, it has used young actors like Varun Dhawan and Parineeti Chopra.
Tencent relies on its home market for the majority of its sales, and the company has achieved rapid growth on the strength of the soaring number of Internet users in China, which has a population of 1.3 billion. Overseas, however, the company's activity has so far been largely limited to the sale of games in Asia, the acquisition of a U.S. game developer and a few other moves.
But WeChat could drive Tencent's overseas expansion. The company reported in July that the number of people registered for the overseas version of WeChat had surpassed 70 million. In August, the number exceeded 100 million. In its July announcement, Tencent said that WeChat was the most frequently downloaded mobile social networking app in India, Malaysia, Mexico and the Philippines.
The rise of China's status on the global economic stage and the resultant active exchanges with other countries have been a benefit to WeChat. Moreover, there are as many as 40 million ethnic Chinese who emigrated to foreign nations and their descendants living around the globe doing business with companies in their mother land, adding to WeChat's potential.
Taking on the titans
In U.S., California-based chat app provider WhatsApp is taking a different approach. Rather than selling stamps or games, the app specializes exclusively in sending and receiving messages, charging users a 99-cent annual subscription fee after one free year. The company announced Dec. 19 that it had reached 400 million monthly active users.
America's Internet giants are nervous about the growing popularity of such apps, even household names like Facebook, which boasts 1.19 billion monthly active users. More and more young people in the U.S. are using chat apps, which, some say, has led to a decrease in time spent on Facebook. Facebook CEO Mark Zuckerberg has taken pains to deny this view, maintaining that teenagers' use of the social networking site has remained steady.
In 2011, his company began offering a messaging app created by separating the function from Facebook. In spring 2013, it launched a service similar to Line's stamps while at the same time offering a new app with enhanced chat capabilities.
Meanwhile, Google has rolled out its new messaging app Hangouts, which supports smartphones, tablet computers and personal computers. On top of sending and receiving text messages and photos, the app can handle voice and video calls. Google Vice President Bradley Horowitz touts Hangouts as doing something other services do not, namely exchanging all forms of information on a mobile device.
As Asian chat apps push ahead with their global expansion, they will increasingly find themselves up against the American Internet business models embodied by WhatsApp, Facebook, Google and Twitter. Clues to how they will meet that challenge lie in the new services they are offering in their home markets.
Tamaki Kyozuka in Bangkok, Takafumi Hotta in Mumbai, Koichi Kato in Seoul, and Ken Kuwahara in Guangzhou contributed to this article.
What is a chat app?
A chat app is an application that can be downloaded onto smartphones free of charge. On Internet-connected phones, the app allows users to exchange messages and photos and make voice calls for free. Chat app operators make a profit by selling games and stylized icons that users can send to one another. Companies and public agencies often create official accounts as a way to directly send information to consumers and citizens.
Twitter and Facebook are also well-known tools for exchanging short messages. The basic function of Twitter, however, is to post messages that anyone on the Internet can read, while a chat app is used for closed communication among people who already know one another. And while some Facebook users are annoyed by friend requests from people they do not know, this is less of a problem with chat apps.