[THE INVESTOR] Line, the Japan-based mobile chatting app unit of Naver, has been the crown jewel of South Korea’s largest internet portal for several reasons.

Line helped Naver to gain a foothold in overseas markets through its popularity in Asian countries. The firm’s revenue currently accounts for one-third of Naver’s outstanding sales.

According to Line’s initial public offering filing, which aims to raise about $3 billion in a dual Tokyo-New York listing set for July, the company will look to generate even more revenue from advertising, after raking in money from games and electronic stickers in its core markets. 




Japan, Thailand, Indonesia and Taiwan are home to most of Line’s 218 million monthly users.

“Before Line’s IPO, investors had questions about which is the better stock, Line or Naver. Now, I would say Line has more growth potential than Naver,” said Kong Young-kyu, analyst at Shinhan Financial Investment.

Overseas sales generated by Line accounted for 36 percent of Naver’s first quarter sale since 2016, up 3 percentage points from the previous quarter.

The messaging app’s burgeoning presence is partly due to Naver’s mobilization drive. 

The company is still undergoing a generational shift to establish and implement new mobile strategies, as some of Naver’s founders are more familiar with PC-based systems.

“To boost Naver’s valuation, a strong performance from Line, in particular persistently solid sales growth from mobile advertisement, is essential,” said Chung Ho-yoon, an analyst at Eugene Investment & Securities.

In a bid to speed up its mobile service evolution, Naver reshuffled its organization to streamline its decision-making processes. The firm also adopted a system called a “company in company” to generate and nurture start-up firms and spin-offs in order to create its next cash cow.

However, these efforts will have to be stepped up due to Line’s growth that has plateaued. 




The number of Line users have been growing at a slower pace recently. The firm has also been having trouble attracting users outside of its key markets, raising concerns on its business strategies prior to the IPO.

Nevertheless, Line is one of the few South Korean-based firms that have seen success in Japan. It was first launched as NHN Japan in the aftermath of Japan’s 2011 earthquake and tsunami. It grew unexpectedly to become the country’s dominant mobile messaging platform over the next few years.

“It is important for Line to continue focusing on its localization strategy,” said Woo Jun-wen, an analyst at HIS.

“Users from Japan and Taiwan may have similar interests in Japanese comics, but users from Thailand and Indonesia might be more interested in other content such as games. Line users have been dropping outside the four main countries, Japan, Taiwan, Thailand and Indonesia,” she said.

By Park Han-na (hnpark@heraldcorp.com)