This little-known app could take on Facebook in a key market (LN, FB, TWTR)
AP Photo/Mark Lennihan
Messaging could be the next big thing.
If it is, Line is perfectly positioned to ride the trend to untold riches. The app has four to five times the number of monthly active users as Facebook in Japan and is similarly popular in Taiwan, Thailand, and Indonesia.
David Gibson, an analyst at Macquarie Research, thinks the company's stock price will shoot up 32% higher on the Japanese markets. The main attraction isn't even the crazy popular messaging app, but rather it's the ad platform behind it.
"Our report is differentiated from others in the market because we met with six major ad agencies to understand their attitude to the LINE Ad Platform," Gibson said in a note to clients.
The biggest markets for mobile ads in Japan are Facebook, Twitter, and Yahoo Japan. These markets are great but are not expanding, meaning prices are rising as more demand meets a stagnant supply.
But Line offers a different story. Line offers advertisements that are a lot cheaper than those of competitors like Facebook and that can reach all 90 million smartphone users in Japan.
"We expect the ad inventory of Line ad platform can drive ¥46 billion in incremental ad sales in FY12/17 and ¥70 billion in FY12/18," Gibson said. That may be a conservative estimate, as Yahoo Japan brought in 110 billion yen, or $1.08 billion, in mobile ad sales last year, according to the note.
Line launched its initial public offering earlier this year and raised more than $1 billion. The app brought in about $1 billion in revenue in 2015, mostly with stickers, games, and ads, which other apps like Twitter have been struggling to use as effectively. Users on average spend $4.98 in the Line app.
The company has seen its share price fall 17% from its initial price of 4,900 yen on Japanese markets and decline 4% from its first day closing price of $41.58 on the New York Stock Exchange.
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