Line hunts for M&A with $1.3b IPO war chest, aims to be one-stop shop


Line Corp plans to use part of the $1.3 bil­lion it gar­nered from last month’s ini­tial pub­lic of­fer­ing to bankroll ac­qui­si­tions of con­tent and technology, trans­form­ing its mes­sag­ing ser­vice into a one-stop shop for Asian so­cial media users.

Ja­pan’s most pop­u­lar mes­sag­ing ser­vice is gun­ning for com­pa­nies in ar­eas rang­ing from ar­ti­fi­cial in­tel­li­gence chat­bots and ad­ver­tis­ing to video stream­ing and games, in­clud­ing those with aug­mented re­al­ity fea­tures, CEO Takeshi Idezawa said in an in­ter­view.

The Tokyo-based com­pany has as­sem­bled a ded­i­cated team to scope out and re­view pos­si­ble tar­gets across the globe. The idea is to build Line into a “smart por­tal,” sup­ple­ment­ing its main­stay fea­tures of chat­ting, stick­ers and games with com­mer­cial ser­vices such as food de­liv­ery, job searches and travel reser­va­tions in main mar­kets.

“We are very open-minded about the size and geog­ra­phy” of po­ten­tial ac­qui­si­tions, Idezawa said. “What’s im­por­tant is that they are the right fit.” Both the busi­ness and the tal­ent that comes with it are im­por­tant cri­te­ria, he said.

Mes­sag­ing ser­vices glob­ally have be­come prime mo­bile des­ti­na­tions as they in­cor­po­rate func­tions be­yond sim­ple chat­ting, such as media stream­ing and on­line shop­ping. Apps like Line and Face­book Inc’s Mes­sen­ger will evolve into “vir­tual agents” that pro­vide ser­vices well be­yond com­mu­ni­ca­tion in three to seven years, said Julie Ask, an an­a­lyst with For­rester Re­search.

She said one ex­am­ple of such technology is Ama­ Inc’s Echo, which de­ci­phers, and acts on, spo­ken com­mands. The pop­u­lar por­ta­ble speaker can hail taxis or buy more sham­poo, by an­a­lyz­ing a user’s shop­ping pref­er­ences and his­tory. Ten­cent Hold­ings Ltd’s WeChat is in­creas­ingly wo­ven into the fab­ric of its about 550 mil­lion users’ daily lives in at least 200 coun­tries and re­gions, let­ting them book ho­tels and buy prod­ucts from a sin­gle app.

Line has the po­ten­tial to of­fer the same and pos­si­bly more. Its users in Ja­pan spend at least five times as much time on the app as they do on Ama­zon, and their ac­tiv­i­ties range from chat­ting to read­ing news and or­der­ing food. That cre­ates data the com­pany can use to bet­ter un­der­stand its cus­tomers. Line in April an­nounced the launch of an AI re­search lab, and funds from the IPO could al­low it to buy star­tups that speed up de­vel­op­ment.

Beef­ing up the plat­form with more com­mer­cial ser­vices re­quires close ties with lo­cal part­ners like re­tail shops, taxi com­pa­nies or banks, es­pe­cially in de­vel­op­ing coun­tries such as In­done­sia and Thai­land. That’s where the IPO cash war chest comes in, which may al­low Line to in­vest in joint ven­tures with lo­cal firms or swal­low them whole.

“In­te­grat­ing pay­ments and com­merce ser­vices — some­thing we’ve al­ready seen very suc­cess­fully through WeChat in China — is a big op­por­tu­nity for mes­sag­ing apps,” said Jack Kent, an an­a­lyst with IHS Markit Ltd. “But it’s not the same as launch­ing a game or con­tent ser­vice, which scales eas­ily. When you’re in­te­grat­ing pay­ments, taxi hailing or other forms of re­tail and com­merce ser­vices, those are done at a lo­cal level.”

As part of on­go­ing ef­forts to be more than just a mes­sag­ing app, Line has teamed up with lo­cal part­ners in South­east Asia such as mo­tor­bike taxi on-de­mand ser­vice Go-Jek in In­done­sia. In April, it also en­tered a joint ven­ture with a Thai firm that en­ables users in the coun­try to pay for sub­way rides, restau­rant meals and on­line shop­ping through its app.

Last year, it part­nered with a Visa Inc. sub­sidiary to bol­ster pay­ment se­cu­rity, and bought a Ja­panese startup that pro­vides pay­ments soft­ware. And in Jan­uary, it ac­quired an­other Ja­panese startup to strengthen its ad­ver­tis­ing on mo­bile de­vices.

While Line is the most pop­u­lar chat­ting app in Ja­pan, it’s run­ner-up to Black­Berry Ltd’s mes­sag­ing ser­vice in In­done­sia, a coun­try with a pop­u­la­tion of at least 253 mil­lion. Idezawa said he will con­tinue to fo­cus on South­east Asia, where the num­ber of Line’s monthly ac­tive users has risen in re­cent months, with a fo­cus on win­ning the top spot in In­done­sia.

In In­done­sia, Line is in­stalled on 71 per­cent of An­droid de­vices, be­hind Black­Berry Mes­sen­ger’s 86 per­cent, ac­cord­ing to re­searcher Sim­i­larWeb. Be­sides beef­ing up mar­ket­ing, an­a­lysts say Line’s op­tions in the coun­try in­clude strik­ing part­ner­ships to add more lo­cal con­tent like news or mu­sic, and grow­ing its com­merce ser­vices. Do­ing so also works to­ward its long-term goal of com­plet­ing the “smart por­tal”.

“What these plat­forms need be­sides au­di­ence is con­text, or data about the users. These plat­forms need to go wide to ac­com­plish that: pay­ments, cal­en­dar, maps, etc,” said For­rester’s Ask. “Mes­sag­ing plat­forms are not the end game.”

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