Lee Hae-jin, the billionaire founder of Internet portal operator Naver Corp, beat back Google Inc to leave South Korea one of the few countries where the US search engine does not dominate.
Now, he is stepping onto the world stage with Line, a messaging app developed by a subsidiary in Japan to overcome downed communications after the 2011 earthquake and tsunami.
However, Lee will face a very different market to the one that welcomed Naver.com.
Instead of developing a local lead and fending off a global giant, Lee will have to take on established rivals in an international context.
“I am playing the part of an attacking winger who needs to run to break through the global market,” Lee, 47, said recently, alluding to a goal-scoring role in soccer, akin to that of FIFA Player of the Year Cristiano Ronaldo.
Line has lured 470 million users with its simple design and elaborate emoticons, such as a happy-go-lucky cartoon rabbit. Its user base eclipses that of local peer Kakao Corp’s KakaoTalk and places Line nearer Tencent Holdings Ltd’s (騰訊) WeChat and Facebook Inc’s WhatsApp.
To fund expansion and close the gap, bankers familiar with the matter said Naver is considering selling shares of Line Corp in Tokyo, New York or both. They said any initial public offering could value the subsidiary at up to US$20 billion.
Lee founded Naver.com in 1999 to rival the portal of Daum Communications Corp and the Korean-language versions of foreign entrants such as Yahoo Inc.
Naver.com attracted new users with features such as a user question-and-answer forum and a search engine which displays results from news, blogs and other categories on a single page.
The portal built up such a lead that its search engine makes up 75 percent of the search market, according to researcher KoreanClick. Google, which embarked on a major push in South Korea in 2006, holds 2 percent.
That put South Korea in a handful of markets, including China and Russia, where Google is not the dominant force.
It also left Naver the country’s fifth-most valuable stock with a capitalization of 27 trillion won (US$26.76 billion).
However, in just three years, Line has grown to account for nearly a quarter of Naver’s 638 billion won in January to March revenue by selling ads, games and emoticons, known as stamps.
About 80 percent of Line’s revenue comes from Japan. Elsewhere, Thailand and Indonesia are big markets in terms of user numbers, and as part of its global expansion, Line has made inroads in Mexico and the US.
The messaging market is still growing and it is likely to take a couple years before any app solidifies itself as a leader in any particular country, said Tom Mowat, principal analyst at Analysys Mason.
“The next few years will be decisive for the global messaging market,” Lee said in rare public appearance at a conference which was held on the South Korean island Jeju.
“So we will concentrate on growing our user base in the near term as opposed to profitability,” he added.
Going global means nothing short of taking on Facebook and Tencent, and Line has neither the financial backing of WhatsApp nor the variety of features such as taxi-booking offered over WeChat.
That heightens the challenge of retaining users in a market where it is common to switch between apps to accommodate the preferences of contacts.
“[The messaging market is] starting to feel an awful lot like cheap prepaid cellular. High churn [user turnover], and there’s not necessarily any customer loyalty beyond the convenience of it,” Mowat said.
Another challenge to ensure long-term growth is how to boost advertising revenue, said Alpha Asset Management’s Hong Jeong-woong, who manages funds holding Naver shares.
Line needs to analyze its vast amount of data and devise something different in in-app advertising, Hong said.
“But Naver hasn’t shown much on this end and I haven’t heard anything concrete from the company executives,” he said.
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