Just a month after word emerged that Japanese mobile messaging giant Line had found a China partner, new reports are saying the company is preparing to formally enter the market in the next few months. The company will certainly have a steep hill to climb in China, where it will have to challenge industry juggernaut WeChat, owned by Tencent (HKEx: 700). But that said, I do think that Line could quickly gain a major audience in China if it positions itself as an alternative for globally-minded business professionals. It should move as quickly as possible, as I fully expect global leader WhatsApp to make a similar major push into China within the next year.
Line has become a major player in Asia over the last few years, but it never formally showed any China aspirations until last month when it reportedly formed a partnership with locally based mobile app store operator Wandoujia. (previous post) Now media are reporting that Line has embarked on a major China hiring spree, as it builds up a locally based team to establish a formal presence in the market. (Chinese article)
Line’s move makes it the second major foreign social networking (SNS) company to formally enter China this year. In February, leading professional SNS company LinkedIn (NYSE: LNKD) launched a China service with a more formal announcement, including a lengthy disclaimer saying it recognized the challenges of the market due to strict self-censorship requirements by Beijing. (previous post)
I haven’t seen any such formal announcement from Line, perhaps because the company is trying to be more low-key about its play for China. It’s also possible that Line won’t make an announcement until it formally launches its China-based service, which is expected later this year. A Line executive refused to detail the size of the recent hiring drive, but said the new team will be responsible for developing locally-oriented services and communicating with Chinese customers.
I traveled to Taiwan over this year’s Chinese New Year holiday, and was surprised to see that Line is quite popular there. WeChat is also rapidly gaining ground in Taiwan, which shares many qualities with the mainland Chinese market and also has historical links to Japan. One big differentiator between the 2 services seems to be image: Line is viewed as a more mature, international service, whereas WeChat is viewed as more of a purely social platform for younger people. A similar dichotomy exists in the west between Facebook (Nasdaq: FB), which is viewed more as a platform for youngsters, and LinkedIn, which is viewed as a professional networking tool.
WeChat is also viewed with a slight degree of suspicion in Taiwan due to its mainland Chinese roots, leading some to suspect it monitors its users and reports their activities to Beijing. If Line is smart, it will try to seize on those kinds of differences to offer a strong alternative to WeChat in China. Microsoft (Nasdaq: MSFT) used a similar differentiation strategy to score previous success for its MSN instant messenger service in China, which was seen as more professional than Tencent’s popular QQ.
Based on all the recent developments, I would expect to see Line formally launch its China service in the next 3-4 months, and I doubt we’ll see any other partnerships beyond the original pairing with Wandoujia. The sooner that Line can launch the better, as I expect that WhatsApp is currently discussing its own move into China following its plan to sell itself to Facebook announced in February. That deal probably hasn’t closed yet, but discussions may already be underway for a WhatsApp move into China. Such a move is unlikely to happen until 2015, but look for lots of fireworks in the market when Line and then WhatsApp pose some of the first serious challenges to WeChat over the next 2 years.
Bottom line: Line is likely to launch in China by September this year, followed by WhatsApp in the first half of 2015, posing 2 of the first serious challenges to the dominance of WeChat.
Doug Young is a former China company news chief for Reuters who teaches financial journalism at Fudan University in Shanghai. To read more of his commentaries on China tech news, click on www.youngchinabiz.com.
