When cloud software company Twilio went public last month with a nice share price pop, tech industry observers mostly concluded that it’s now safe for unicorns to follow suit.
Line’s shares jump 26 percent in IPO, but the messaging service has serious hurdles ahead
The company is dominant in Japan, Thailand and Taiwan, but user growth has slowed.
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Today’s tech IPO — the public offering of the Japanese messaging service Line — will probably lead Silicon Valley to the same conclusion. It’s the biggest tech stock offering of the year (so far), and Line’s stock rose more 26 percent to close around $41.50 a share.
But while Line’s IPO proves that there’s a healthy appetite among investors for tech stocks, that’s not necessarily a vote of confidence in Line’s long-term business. The company initially wanted to go public around the time Alibaba did in 2014, but then scrapped those plans (twice), hoping for more favorable market conditions.
Since then, Line’s user growth has slowed down tremendously. The all-in-one messaging, commerce and media app dominates in Japan, Thailand and Taiwan, but rivals like Facebook and Snapchat are catching up.
In an in-person interview with Recode at the New York Stock Exchange, Line Chief Globalization Officer Jungho Shin gave a bit more detail as to how the company plans to grow its base.
“We’re trying to expand our service, and it’s not just messaging — content, car navigation and more. The messaging service is just one dimension,” Shin said.
He said the company is focused on something he called “culturalization,” a process by which Line will develop services and features tailored to users’ needs in individual markets, a move that Line hopes will help give it an advantage over rivals like Facebook.
Looking beyond its core markets of Japan, Thailand and Taiwan, the place where Line will next try to apply this model is Indonesia. The country of around 250 million people has yet to come online at the same pace as some of its more well-off Southeast Asian neighbors, and some view it as the next growth market in the region. Others are less bullish. According to the company’s prospectus, it eventually wants to reach the U.S.
Acknowledging that Line (which raised more than $1 billion this week) can’t keep up with a behemoth like Facebook in terms of spending, Shin said that “culturalization, which is one step deeper than localization,” is a key part of its plan for success.
As for the kinds of investment in content that the company is making, Shin said the company is paying attention to trends like virtual reality and the surprise success of Pokémon Go.
Shin stressed that what’s important isn’t necessarily the underlying technology, but rather the power of highly marketable IP, like Pokémon. Nodding to Line’s own efforts in the area, he mentioned the popular game and tie-in collectibles Tsum Tsum, co-developed by Konami and Disney respectively.
This article originally appeared on Recode.net.
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