NHN Japan caused a big splash yesterday in Japan when the company announced its bold plans to transform LINE into something like a platform for games, music, coupons, books, news, and tons of other content. In addition, the messenger app itself will become more of a Facebook-type of social network after the integration of profile pages and a newsfeed.
In other words, LINE is to become an amalgamation of social gaming, social commerce, and social networking – like GREE/Mobage, Groupon and Facebook rolled into one. CyberAgent is following a similar approach with Ameba.
Can this work?
My first reaction, before any of these plans actually get implemented, is ” probably not”. I am more certain on a global scale, but I also have doubts for the Japanese market (which I will focus on here).
NHN Japan is using massive marketing (especially in Japan) to push LINE, and they apparently can count on the support of their (large-cap) parent company, Korean web powerhouse NHN.
And in fact, NHN Japan has a lot of catching up to do, as the company completely slept through the mobile social gaming market boom in its native market of Japan – where it was, until the rise of GREE and Mobage, the undisputed king in online gaming.
Here are my personal predictions.
What problem will the new LINE app actually solve?
The problem I see is that the new strategy will clearly water down the core value proposition of LINE: pull information from your phone’s address book (“automatically” establishing a very intimate social graph, at least initially) and let users communicate with others through calls or (much more popular) text chatting.
A very simple approach that appeals to a mass market: no registering, setting up profile pages, adding friends, adjusting privacy controls, etc. required (a lot of this can be done later). Calls, even though the quality isn’t fantastic, are free.
For people fed up with or those who never bothered to deal with social networking services to begin with, LINE (in its current form) is actually a good alternative.
My hunch is that LINE positioned as a “mobile platform for everything” will alienate users and possibly even slow down growth: I simply think this approach doesn’t solve problems for users but will ultimately confuse them – even though NHN is planning to roll out all new features one by one.
Can Mixi serve as an example?
One reason for my skepticism is that there is a “historic” example from Japan where this kind of approach didn’t pan out: Mixi.
The country’s biggest real-identity social network did try to expand into social gaming, and the results were certainly nowhere near what Mixi expected. In Q3 of the current fiscal for example, Mixi made around US$14 million with fees collected from games and other services. By way of comparison: sales for GREE, which only focuses on doing one thing – social games – right, hit US$575 last quarter.
With Mixi Mall, Mixi also dipped its toe further into social commerce in March. So far the company has been silent regarding the success of this new business segment. In the latest financial report issued in May, for example, there was no word on how Mixi Mall is actually doing two months after launch – not really a good sign, and Mixi Mall isn’t even Mixi’s first attempt to integrate shopping into its network.
And Mixi actually started these “experiments” as a full-fledged social networking platform to begin with: at this point, LINE can be called “a light social network” at best.
Why isn’t DeNA doing it?
A second reason for my skepticism comes to my mind when I flip the Mixi example and think about why DeNA is not following NHN’s approach with Mobage. DeNA could have done, what LINE is trying now, years ago.
After all, DeNA is not only active in social gaming but also in mobile commerce. In fact, DeNA started doing online auctions in 1999 and went IPO in 2005 as an online shopping and mobile auction company.
At the moment, DeNA is running a couple of (successful) mobile commerce businesses, i.e. mobile auctioning platform Mobaoku.
But apart from relatively mild cross-promotion, there is a reason why the company is trying to keep Mobaoku and other commerce services away from Mobage’s virtual social graph: Japanese users want to access Mobage to play games, not to shop or to connect with their real friends.
This is why Mobage just provides a gaming experience, just like GREE does (players don’t know who the other users are in real life).
Conclusion
For social games, there is GREE and Mobage in Japan, Facebook for other countries. For coupons and mobile shopping, there is a plethora of services available. For social networking, Japanese users can go to Mixi, Twitter, or Facebook. All of these problems are solved.
NHN Japan CEO Akira Morikawa yesterday said his first goal with his all-in-one platform strategy is to top Facebook – I am, however, speculating that LINE will not be able to replace or even endanger any of the leading services in Japan (or elsewhere).
