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Three Questions for the CEO of Messaging App Line

How the Japanese company Line turns free messages into real revenue.
June 29, 2015

The killer app for the cell phone was SMS. For smartphones it’s using your data connection to send short messages for free. Messaging apps such as WhatsApp, owned by Facebook, and Line, based in Japan, top the charts of most popular apps around the world and are used daily by billions of people. WhatsApp alone ferries 30 billion messages a day—significantly more than the global SMS system.

Takeshi Idezawa
Takeshi Idezawa

How free messages can make a good business is a question that leading apps in the United States and Europe are still trying to answer. But some Asian messaging apps are already generating significant revenue by making messaging into a medium that people can use to spend money and that businesses can use to communicate with their customers. Facebook appears to be following suit, with a recent announcement that it will allow other companies to build services on top of its Facebook Messenger app.

Line, whose 205 million monthly users are concentrated in Japan and nearby Asian countries, has taken that strategy further than most competitors. It has rolled out features that let people use messages to send money to one another, pay for virtual goods such as games and stickers, and order food delivery and taxis. Line’s cut of those transactions, along with ad sales, led it to report over $200 million in revenue for its latest quarter.

Line was named to MIT Technology Review’s annual list of the world’s 50 Smartest Companies last week; San Francisco bureau chief Tom Simonite chatted with its CEO, Takeshi Idezawa, by e-mail.

What can a messaging-based service like Line offer people that the more complex and established “feed-style” social networks like Facebook and Twitter don’t?

Social networks with semi-open feeds, like Facebook and Twitter, were created in order for users to share information with a great number of people at once. However, these social networks expose users to a wide range of potential viewers with which they have a wide range of relationships, rendering these services unfit for communication that resembles real conversations.

On the other hand, messenger apps serve the role of nurturing interpersonal relations. Offering a range of communication options from one-on-one chats to large-scale communities, messengers are comprised of human relationships built within closed groups, making for methods of communication that more closely mirror offline conversations.

Why is Line’s conversation-based format attractive to businesses? Is it just because consumers use it, or does the format suit them too?

Line lets businesses send messages to users in real time, allowing users to receive them just like they would any other message from a friend or family member. This design allows for a highly accessible form of push marketing.

While feed-based social networks focus on keeping up with the latest information, people use Line for communication, meaning they frequently check the app to see if they have any new messages. This translates to an extremely high “read rate” for messages. By pinpointing certain days and times for sending messages and coupons when they are most effective, these messages are likely to lead to actual purchases. In order to keep all this information coming from businesses from becoming a burden to users, Line places limits on the number of messages business can send and has set guidelines in place to make sure they are only distributing information that is beneficial to users.

Line is one of the biggest messaging services, but there are many others. Do you think there will be consolidation, with only a small number of messaging services surviving?

We do think consolidation will occur. However, due to different countries having different major players, and certain apps specializing in certain features, we do not think that only one service will remain. Instead, people will use multiple services for distinct purposes, making for an oligopolistic market.

We are continuing to increase our global market share due to Line differing from traditional text-based messaging apps, offering an all-in-one package including free phone calls, stickers, photo editing, and many other features to satisfy user demands.

We are transitioning from an era of simple text-messaging tools to an era of all-inclusive messenger apps with an array of features designed to meet a range of user needs. At the same time, there is also a constant demand for services designed to meet specific needs that these multifunctional messengers simply cannot fulfill.

People tend to use all-inclusive, multifunctional messengers like Line for their main communication tool while also using specialized apps for very specific purposes. Photo-sharing services with time limits and messengers designed for couples are an excellent example of this trend.

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