Messaging could be the next big thing.
If it is, Line is perfectly positioned to ride the trend to untold riches, as it has four or 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 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 currently Facebook, Twitter and Yahoo Japan. These markets are great but are not currently expanding, meaning prices are rising as more demand meets a stagnant supply.
But Line offers a different story. The advertisements Line is offering are a lot cheaper than competitors like Facebook, and can reach all 90 million smartphone users in the country.
“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 in mobile ad sales last year, according to the note.
Line launched its IPO earlier this year and raised more than $1 billion. The app brought in around $1 billion in revenue in 2015, mostly with stickers, games and ads, which other apps like Twitter have been struggling to utilise as effectively. The average user spends $4.98 in the Line app.