The Japanese government is demanding Naver to divest its stake in LY Corporation because LINE has become more than just a messaging app in Japan. It has transformed into a core lifestyle platform, enabling users to shop, engage in finance, entertainment, and more. Originally developed as a messaging app by NHN Japan, a subsidiary of Naver, in 2011, LINE’s development was prompted by the communication disruptions experienced during the Great Tohoku earthquake in March 2011. Lee Hae-jin, then-chairman of Naver’s board, instructed the development to ensure communication even during disasters.
Starting as a simple messenger for text messages, LINE quickly expanded its features to include video calls, emojis, games, and more, amassing nearly 40 million users within two years of its launch. Over the past decade, it has become a part of Japan’s everyday life infrastructure. LINE is currently used by eight out of 10 Japanese citizens, establishing itself as the “national messenger.” Japanese people use the app not only to message friends but also to pay for goods at convenience stores, settle utility bills, check news, shop, receive remote medical consultations, and engage in various other daily activities. During the Kumamoto earthquake in 2016, Japanese people used LINE as a “hotline” to request rescue and confirm survival. This is why there are calls within Japan for “Japanese companies should operate platforms that have become central to the lives of Japanese people.”
One of LINE’s strengths lies in being a “super app,” allowing users to access various services based on essential messenger functionality. A notable service is “LINE News,” which initially provided summarized news but later capitalized on the benefits of real-time updated news content by curating topic-specific news and presenting related news in short videos to attract users. As a result, it amassed around 77 million users, becoming the top mobile news service in Japan.
Naver’s webtoons are serviced through LINE under the name “LINE Manga,” with over 10 million users viewing webtoons through the platform. LINE has played a significant role in fueling the “webtoon boom” in Japan.
In Japan, LINE is a pivotal financial hub that combines payments, money transfers, and more. Despite Japan’s inclination towards cash transactions, with 200,000 ATMs nationwide, the government expedited its shift towards digital finance in preparation for the Tokyo 2020 Summer Olympics. This fostered the proliferation of convenient payment solutions. Since its introduction in 2014, LINE’s payment platform, LINE Pay, has experienced rapid expansion. It now encompasses various functionalities such as convenience store purchases, online shopping, money transfers, and utility bill payments. Alongside SoftBank’s “PayPay” and Rakuten Group’s “Rakuten Pay,” LINE Pay has emerged as a prominent player in Japan’s e-commerce landscape.
To bolster its e-commerce venture, the messenger leverages LINE Pay within LINE Shopping, a platform facilitating transactions between merchants and consumers. Boasting over 47 million monthly users, LINE Shopping has become a staple for online retail. The platform also diversifies its offerings by introducing ancillary services like live commerce, which recommends products utilizing videos, and gifting options, which enable users to send items to their contacts.
The crux of LINE’s strategy lies in augmenting existing services while introducing fresh content to prolong user engagement across messaging, shopping, payments, and more. Hence, LINE recently launched “LINE VOOM,” a short-form video platform where users can share and recommend content, earning rewards based on viewership. Moreover, the company has ventured into new domains such as “LINE Doctor,” a remote medical service; “LINE Music” for streaming music; and “LINE Coupons,” redeemable at convenience stores and eateries.
Although LINE’s services are predominantly self-developed, some leverage Naver’s technology. For example, LINE Wallet, a fintech service integrating payments and memberships, harnesses Naver’s algorithmic prowess to enhance user experience. LINE improves the accuracy of the recommendation algorithm by the following steps: analyzing and grouping the behavioral patterns and characteristics of users and then adding its social network data to it.
LINE Shopping utilizes Naver’s AI product recommendation system, AiTEMS, while LINE Pay employs Naver’s advanced optical character recognition (OCR) technology to enable bill payments via smartphone cameras. Consequently, despite a stake sale reducing Naver’s influence over LINE, analysts anticipate continued reliance on Naver’s technology in the foreseeable future. Professor Ichiro Sato from Japan’s National Institute of Informatics said, “Despite LINE’s strides in technological innovation, the gap between LINE and Naver remains substantial, requiring more than a year or two to bridge.”
