Line's IPO Highlights The Potential Of Messaging Apps As New Media

Thomas Husson

According to Reuters, Japanese messaging app Line has filed for an IPO valued at over $10 billion.

No doubt the space is heating up. Competition is increasing. Facebook acquired WhatsApp for $19 billion. Japanese Internet giant Rakuten purchased Viber for $900 million. More recently, Kakao Corp (the maker of KakaoTalk, South Korea’s top messaging service and a direct competitor to Line) and Daum (one of South Korea’s largest Internet portals) announced they would merge through an equity swap, creating a company with about $2.9 billion market capitalization!

To put all this activity in perspective, I recently published a new piece of research explaining how messaging apps are morphing into new media portals and are becoming the new face of social.

WeChat is jockeying to become a global digital platform, thanks to the deep pockets of its parent company, the Chinese Internet giant Tencent. The other Chinese Internet giant, Alibaba, which recently invested $280 million in Tango, could also connect the dots between its commerce, payment, media, and social capabilities.

Soon to have 500 million registered online users, Line is definitely a key player in the space. The money to be raised will help in developing the already significant international expansion and further develop the positioning of Line as a “smartphone life platform.” The majority of the $335 million in revenue generated in 2013 came from games and about 20% from stickers — “emoticons on steroids,” as my colleague Julie Ask called them.

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When Mobile Becomes The New Face Of Social

Thomas Husson

Messaging apps have the potential either to become digital platforms or to significantly enhance the power of current platforms because they so clearly deliver the three things that determine digital platform power: frequent interactions, emotional connection, and convenience. WeChat is for example already morphing into a digital platform offering, thanks to the deep pockets of its parent company, the Chinese Internet giant Tencent.

While today’s opportunities are limited by consumers’ reluctance to engage with brands on such intimate channels and by immature marketing tools, it is definitely time for marketers to experiment and to anticipate the next steps.

Indeed, you’ve surely heard of the second-largest acquisition in tech history, Facebook’s purchase of WhatsApp for $19 billion. However, you may not have heard of KakaoTalk, Kik, Line, Secret, Snapchat, Tango, Viber, or Whisper.

These messaging apps are the new face of social in a mobile context.

Contrary to social media that are generally public broadcast mechanisms that facilitate one-to-many communications, a messaging app is a typically private, one-to-one or one-to-few communication and media tool optimized for mobile. Such smartphone apps can access your address book, bypassing the need to rebuild your social graph on a new service. As Evan Spiegel, the CEO of Snapchat, puts it, “We no longer capture the real world and recreate it online – we simply live and communicate at the same time.”

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What To Learn From The Japanese Mobile-Centric Market

Thomas Husson

Japanese consumers are among the most mobile-savvy in the world: They were shopping, banking, and gaming on mobile phones long before consumers in other nations. The Japanese mobile ecosystem used to be unique; telecom operators specified to Japanese handset manufacturers the design of services to implement on multimedia phones. This is changing in an app world.

Indeed, the mobile market is opening up quickly to the smartphone app ecosystem. While Japan is a mobile-centric society, smartphone adoption has lagged behind other major markets. Many international brands launched their first mCommerce initiatives in Japan several years ago, but the market subsequently disappeared from the innovation radar due to the US-centric smartphone app ecosystem. But this is changing. It is time to take another look at Japan to uncover how the nation is combining innovation and scale as its market embraces smartphone apps.

More than a decade ago, I had the opportunity to work with NTT DoCoMo to introduce i-mode — the mobile multimedia service in France. At that time, Japan was clearly two to three years ahead of the rest of the mobile world. The Japanese market — and more specifically, the i-mode business model — is rumored to have inspired Steve Jobs to launch the Apple App Store. After that, Silicon Valley became the new source of innovation and inspiration for mobile marketers. Now that the app ecosystem has come full circle, marketers should again consider mobile marketing in Japan, benefiting from a more open ecosystem to distribute their apps and engage with Japanese customers. I recently spent a full week in Japan, and it is fascinating to see the relationship people have with mobile phones over there.

There are lots of lessons to learn from the likes of Rakuten, Line, Felica, Softbank, or NTT DoCoMo and from a mature ecosystem of mobile contactless and connective-tissue technologies.

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Messaging Apps Are Thriving In The Age of The Customer

Thomas Husson

By now, you've surely heard of the second-largest acquisition in tech history, with Facebook acquiring WhatsApp for $19 billion.

However, you may be less familiar with other messaging apps like LINE, KakaoTalk, KIK, Nimbuzz, SnapChat, Vibes, Whisper, and many others.

If you think messaging apps are just a free way to communicate, you’re missing their potential: They are Mobile’s Trojan horse, as explained by my colleague Julie Ask here.

Messaging apps are mushrooming.They illustrate perfectly the age of the customer, which Forrester defines as a new business era where your customers are now empowered through social, mobile, and other technologies giving them the power to disrupt your business. Why? Because they are mastering the four key market imperatives Forrester has identified as critical to differentiate in the age of the customer:

■  Transforming the customer experience over SMS and other messaging tools. Messaging apps offer differentiated and seamless experiences over SMS and other mobile communication tools. For example, they offer advanced group messaging functionalities, multimedia features, constant innovation, and ability to opt-in or follow brands at consumers’ convenience. They are now morphing into marketing platforms redefining social media.

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Mobile & Social Are Two Sides Of The Same Coin

Thomas Husson

The vast majority of Facebook and Twitter usage is coming from mobile devices, and both companies generate a significant proportion of their revenues via mobile ads (53% for Facebook and more than 70% for Twitter end Q4 2013).

  • Facebook is splitting into a collection of apps (Instagram, WhatsApp, Messenger, Paper, etc…) and likely to announce a mobile ad network at its F8 developer conference in San Francisco in a couple of days. While failing brand marketers, according to my colleague Nate Elliott, Facebook is increasingly powerful at driving app installs for gaming companies and performance-based marketers who have a clear mobile app business model.
  • That’s why Twitter introduced mobile app install ads a couple of days ago and leveraged its MoPub acquisition by integrating ad-buying capabilities. Twitter is less and less about micro-blogging and more and more about traditional media – the place to be for real-time information consumption.
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Why Did Facebook Buy WhatsApp? Dwindling Supply Of Options To Grab Hundreds Of Millions Of Users ... That Are For Sale

Julie Ask

That's one reason ... but here are a few more .... 

1. 450M active users (Source: NY Times)

2. Adding 1M users daily

3. 70% of MAU use the service daily (Source: TechCrunch)

4. WhatsApp offers users in Europe, Brazil and other emerging markets (= net new audience) (Source: Gravity/Techcrunch)

5. Nearly 200 minutes of usage each week (Source: Mobidia)

6. Facebook gets how to monetize mobile through paid advertising without wrecking the user experience. (In Q4 2013 they crossed over from 49% of revenue from mobile to 53% from a base of 945M mobile monthly active users) Source: Facebook, TechCrunch

 

Why $16B to $19B? I am not a financial analyst, but here are a few thoughts:

- Facebook generated $1.37B in mobile revenue in Q4 2013 on a base of 945M users ... annualized that is $5.80/MAU (monthly active user)

- WhatsApp already generates $1/user for a chunk of their users through a subscription fee (less fee to app store?)

- If WhatsApp users can be monetized at the same value, that adds another 50% approximately in mobile ad revenue

- Facebook reported 914 minutes of use on mobile per month in 2013 (Source: allthingsd.com)

- According to Mobidia, only Kakao Talk has more

- WhatsApp is already located in Si Valley

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