LINE is the operator of Japan's most popular messaging service. In an interview with The Worldfolio, Takeshi Idezawa, CEO of LINE, explains the company’s diversification strategy to pioneer new business segments and unify communication platforms on LINE’s smart portal. With services spanning from instant messaging and games to video streaming and online payments, LINE provides its users a smart way of communicating bringing more context with the use of artificial intelligence (AI).
The Internet of Things (IoT) is estimated to reach a global industry value of $14.4 trillion by 2022. IoT is increasingly blurring the lines of economic sectors and links industries together to provide connected products and services. What role can Japan play in the Fourth Industrial Revolution?
It is an important shift that is connecting the Internet with physical manufacturers. This is a big chance, but probably also the last for Japanese companies to be at the forefront.
We have to think about how people are going to use and connect with the different “things” over the Internet; what they will use as the controller of IoT products and services. From our point of view, we want to improve the usability of the application and make it the remote controller for a wide variety of services. As the users carry smartphones all the time, we want LINE to be the interface of choice.
To give some examples, you can already become “LINE friend” with home appliances such as your refrigerator and ask questions such as “how many beers do I have left?” or you can talk to and control your robot vacuum cleaner via LINE.
Can you give more detailed information about the genesis and the key milestones of your company?
Before we created LINE, we had a few services during the PC era, during the feature phone era we lost our founder and our business somewhat declined. So around 2010 we took the executive decision of putting our eggs in the smartphone basket.
When smartphones appeared, we knew that the device would be used primarily as a communication tool, different from the PC. Therefore, in our planning process for LINE, we focused on ways to pair up smartphones with communication. At the beginning, we had two different ideas, the first one was LINE as a chat app; the other one was more like Instagram, a photo album.
After the Great East Earthquake in 2011 everyone noticed that people were having a hard time trying to communicate with their families and close ones. At that time and after a quick decision we realized that we want LINE to be a communication tool so we include the chat, which at the beginning was very simple. That same year we improved the app including two important features that were to be crucial for the future of the company: the free call option and the stickers. This particular history is tied back to our mission statement, ‘Closing the distance’. We want to connect not only people but information and all kinds of services.
Chat applications in Japan have a very strong networking-effect, you use apps that your friends are using which then attracts more and more people. Once you have a good user base, your organic growth increases automatically. In 2011 with the smartphone market growing bigger in Japan, we entered the market with a very good product at a perfect time. Therefore, LINE became the preferred online meeting point for Japanese to chat.
It looks like you are trying to put all fragmented portals and different services–such as instant messaging apps, Instagram, Spotify–together into a single platform. How do you plan to transform LINE into the smart portal of choice?
According to an American survey, half of the Internet connections are made through smartphone apps–including tablets. And the worldwide trend says that people spend most of the time in chat apps. In Japan, it is obvious that younger generations do not use emails or landline calls anymore. Search engines lose potential when used through smartphones. Therefore, as the people spend most of the time in chats we want LINE to become a gateway providing a smart type of communication.
Chat apps are also bots. Behind the scenes of bots, there is AI, which can create a smart way of communication bringing in more context and learning through the usage. As an example of smart B2B usage, we have a delivery company in Japan that utilizes chatbots for the user to specify the redelivery date. So, through LINE chat box interface you can choose your preferred redelivery date. Moreover, you can book flights through LINE.
We have a lot of content. For instance, music, comics and game services. More recently we added LINE NEWS that is growing very fast and also a live video streaming service called LINE LIVE, which is also doing very well too. You can do many other things on LINE. You can search and apply for jobs, for instance.
With LINE GAMES, you are playing with your actual friends, very different from the anonymous style of PC-gaming. The same with LINE PAY, based in communication far from the program oriented of Apple or Google Pay, you can send personal money to your friends.
Could you please give us some financial highlights of LINE’s performance this year? What is the reason behind the double-listing on TSE and NYSE?
LINE’s revenue comes from three main pillars: Ads (40%), games (30%) and stickers (10%). Earnings coming out from the advertising are doubling year-on-year. Talking about the dual IPO, we choose Japan for a natural reason; we still make 70% of our profit from the Japanese market. The reason for going to the NYSE is that we want to operate in the same playground where the powerhouses like Microsoft, Google, Facebook are. We are in an increasingly competitive environment where these companies want to increase their share in the communications market. We are small and for now, however we are not taking the defensive position. We have to increasingly become more aggressive.
Our IPO was very successful, despite uncertainties in the market such as Brexit, because investors realized that LINE is ahead of the curve by constantly innovating in an industry that is still very young and in its making. We are the industry.
One of the premises of the Prime Minister Shinzo Abe is to connect more and more of the Japanese economy with others overseas. In this context, what is the role of the American market in your global expansion plan?
Of course, at some point we want to go to take a bigger market share in the US market. Business-wise for us, it is better to focus on the Asian market, with a booming medium class, going forward. Now South East Asian markets (Thailand and Indonesia) are responding very well to the arrival of LINE. We have succeeded in penetrating markets that have previously rejected western competitors, because we approach the countries with a tailored strategy instead of offering the cookie-cutter approach, all different markets the same services. We call it ‘culturalization’ which is basically localization at its deepest level
In your overseas strategy, are M&A or partnerships with American companies contemplated, especially with Silicon Valley ones?
We have already invested in a Silicon Valley-based venture capital firm. So, that can be one of our footholds going forward. Apart from our LINE branded app, we have launched a selfie app, B612 that is growing successfully in Japan and globally with more than 250 million downloads.
Since you said that you want to play in the same field with the big names in the industry, and considering, for instance, Microsoft’s significant investment in AI. What’s “the next big thing” for LINE?
We think that AI will be a very important driving factor in the near future, especially considering the combination between AI and the chat interface.
Going forward the interface of the future is more about voice commands instead of smartphones. You will be able to open your emails, browse the internet with one word. Looking even more forward in the future, we may communicate with each other using brainwaves.