Articles

LINE's Global Strategy: A Paradigm Shift in Social Media

October 17, 2013

Speaker:
Akira Morikawa
, Chief Executive Officer, LINE Corporation

Presider:
Masaaki Maeda
, President & CEO, NTT DOCOMO USA, Inc.

On October 17, 2013, LINE Corporation's CEO, Akira Morikawa, spoke about the transformation of LINE, a simple IM app for Japanese users, into a worldwide communication platform with over 260 million users [as of October 17, 2013].

LINE Corporation is based in Tokyo and is a wholly owned subsidiary of Naver Corporation, the largest internet company in Korea. The company was founded to serve Japan only, but now runs the worldwide LINE communications business.

A project team at the company launched LINE app in 2011 June. During the Tohoku earthquake and tsunami Japan's telecom systems were knocked out, but internet networks—and thus IM—still worked. Not knowing when the next crisis would occur, LINE Corporation wanted to offer this new service to users as soon as possible and decided to release it by the end of June. Although there were many obstacles along the way, they put their hearts and minds into creating this new smartphone communication service, and in just 1.5 months, LINE was launched.

At the time, social networking systems in Japan were used to communicate "not only with close people around you, but with people you didn’t know, anonymous people," Mr. Morikawa said. LINE was designed with more intimate groups of people, such as colleagues or families, in mind.

Even the earliest smartphones offered simple applications "that could send messages easily and casually, free of charge, going across the fences of telecommunication carriers," he noted. Smartphone makers have added many new functions, from video messaging, games and camera applications to timelines and other social networking functions. The smartphone market in Japan is no longer limited to "technology-related people or nerds," but serves a general consumer audience, including large numbers of young women and children.

A Revolution in Social Networking

Social networking is shifting away from the earlier, open SNS structure and its generalized "friend," "follow" and "follower" categories to an "era of closed SNS based on real human relations among friends, significant others and families."

Keeping in touch via closed SNS becomes "more intimate, and makes the relationship even richer. For example, husband and wife—the relationships improve through the use of this. Or, 'My daughter didn’t used to talk to me, but I got connected through LINE.' These are actual examples that we have heard," Mr. Morikawa observed. Instant messaging has become not just information exchange but "emotional communication," using what "has indeed become the world’s common language."

Management Principles

Mr. Morikawa discussed his management principles and how LINE is encouraging innovation and nurturing flexibility:

Plan for the future—but not too far ahead. "We try not to think too far into the future," he said. "When I’m giving interviews to people in the mass media, I’m often asked, 'What is your outlook for three years from now?' I will tell them, 'I have no outlook whatsoever. I’m not considering it at all.'

"And I’m truly not considering it at all. And the reason for that is that I don’t find much value in thinking too far into the future. It’s not going to work out that way anyway."

"Maybe this is very Japanese, but I think once you say, 'Three years from now this is how it’s going to be,' then you end up moving towards that. But that’s not the way it works." So "we look forward three months, and we try and focus on that three-month timeline, trying to do everything I can, think about how things are going, how the organization is moving."

Work in parallel mode. "Now we’re at a point where in real time we can see users, we can see how things are changing, and so if something happens then that shows up in data, we can look at that data and make improvements as necessary," Mr. Morikawa continued.

"The way we look at it is if you have time to hold a meeting, then you use that time instead to create something and get it out in the market." Thus "we pursue projects simultaneously in a parallel mode. We don’t create specification documents. We get an idea of it. We move things forward and make adjustments as we go."

"What kind of corporate culture do you need in order to surpass the speed of change? You can’t afford to wait for someone. Instead you have to work like a soccer team. You keep passing the ball back and forth to reach the goal."

In group decision-making, less is more. "When you create something, then there is a tendency for a lot of people to gather and start to debate. Once you’re in a situation like that, things won’t move forward. The only thing that will come out of that is a product of compromise."

The solution? "We try not to discuss things with too many people," Mr. Morikawa said. "If you get a certain level of certainty on something, then instead of debating it too much we just try and move forward with it and make breakthroughs."

Product Innovations at LINE
Earlier smartphone apps required people to log in with their user IDs, an unnecessarily burdensome process in LINE's view. So LINE users are asked simply to input their phone number—not something anyone is likely to have forgotten.

Like its competitors, LINE offers free user accounts that include free messaging and free voice calls. But LINE is not just a basic communications service: it's "also at the same time a platform," Mr. Morikawa emphasized.

The service comes with three types of stickers, or oversized emoticons: free, paid and sponsored. The sponsored stickers are free to the user and paid for by brands such as Disney and Hello Kitty; over 300 different characters [as of October 30, 2013] are signed up as sponsors, and there are sponsors of other types as well including sports teams such as Real Madrid.

Another source of revenue for LINE is the "family application." These are apps that offer games, avatar services, horoscopes, comics and e-books; LINE will be adding music and ecommerce services as well. Games are "basically free of charge to play," he explained. "But if you want a higher score, or you want to compete and win, for those people we sell items within the game, and that leads to our sales."

There's also an official account service that users can subscribe to. "We charge for official accounts to sponsored companies.... In the beginning others thought that this was expensive, whereas competitors are providing it for free.... But we’re actually seeing it contribute to sales and showing up in our results. At the same time it’s giving us an overwhelming advantage in acquiring users," he said.

"Lawson uses the public accounts service to send coupons for a fried chicken dish known as kara-age-kun to high school students, timed to reach these customers as they're leaving school for the day. The service thus connects online with offline. "Once we do that then I believe we become an infrastructure in the true sense "

The diverse makeup of LINE's workforce plays an important role in fostering innovation. "Many foreigners work at our company. It has a ratio that’s much higher than many other companies. I think that maybe there is no right answer in the world, but essentially we just try and plant the seeds and see what will bear fruit.... That’s how we have achieved our growth."

With stickers, official accounts, working together with designers or with local companies, "we try and do things that meet the local lifestyle and the local cultures where our users are."

LINE aims to set up an ecommerce business dedicated to the smartphone market "within the year," Mr. Morikawa said. "Through our service anyone can become a seller or a shopper anytime and anywhere." Also within the year, LINE plans to launch a music service that will enable users to enjoy music online with their friends. The details of both are confidential; the music service will be offered first in Japan and then expanded globally."

***

Q&A with the audience followed.

Can you talk about LINE's competition outside of Japan? I'm thinking about WeChat, WhatsApp, Facebook.

Vis-à-vis KakaoTalk, from Korea, and WeChat, from China, it's "the stability and quality of LINE [that] we think makes us number one," Mr. Morikawa said.

At one point WhatsApp had more users in Thailand than LINE, but LINE caught up there and passed its rival. In Spain, however, WhatsApp is "still very strong."

Regarding the popular LINE stickers, Mr. Morikawa commented: "Among U.S. and European users, the sticker may seem a little childish or maybe it’s embarrassing to use it at work," so their inclination may be to use LINE only for family and friends. But "I think this is gradually changing."

How will LINE be expanding into Latin America?


LINE’s marketing efforts began in Spain, and plans to increase its business in India, as well as moving into South America, especially Brazil and Mexico, he said. "Also from Spain we will go across the Alps to the European countries," with a focus on France, Italy or Russia.

How are you using local content providers in your rollout to the American market with your stickers?

"Once we have a large user base in the United States, then we would look to roll out something" with U.S. companies that have popular characters, Mr. Morikawa said.

When you offer your apps through Apple and Google, do you have to share 30 percent of your revenue with those companies, just like any other app company?

Yes, Mr. Morikawa replied. "But we also have some prepaid services, and some services over the Web.”

And ecommerce, do you share that as well?

“There is a possibility that we may make changes to that. We’re keeping it under wraps for the time being."

What are your core advantages versus DNA, Gree and others in the highly competitive mobile gaming market in Japan?

"What we provide is a communication service," Mr. Morikawa responded. Gree and DNA have standalone games, whereas LINE's games connect the user with others. The company hasn't raised its prices for games, because doing so would only provide a temporary spike in revenue; LINE wants to cultivate that market over the long term.

—Katherine Hyde


Topics:  Business

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