Should Facebook Inc. (FB) Be Anxious About Line App’s Growth?

Must Read

End Of Free Ride For Ola And Uber: GOI Sets New Rules For Cab Aggregators!

For long Ola and Uber have been enjoying the free ride on charging surge price from customers...

Google Pay Fee On Instant Transfer: An Indication Of Google’s Aggressive Monetisation Strategy?

Google has decided to levy fee on instant payment, starting from the US market.

Facebook’s Past Comes Back To Bite As South Korea Fines Them For 2018 Scandal

The social media behemoth Facebook Inc. (NASDAQ:FB) has once again proved they are the true arch-nemesis of...

Surely it’s old news by now that Facebook Inc. (NASDAQ:FB) paid $19 billion for WhatsApp in cash and stock. After plugging in the numbers, it essentially paid $42 per user. Apparently, the decision to acquire WhatsApp is proving worth as mobile messaging app recently tweeted that it has hit a new milestone by delivering 64 billion messages in one day, which is 20 billion outgoing and 44 billion incoming messages, to be more precise.

Line mobile app number of users growth 2014

Value Worth Of Each App User

What is a mobile messaging app user worth? And how do we know if the price is too high or low?

While WhatsApp has about 465 million users and the Japanese app Line, providing free mobile messaging, voice and video calls, has grown to 350 million users in February 400 million users in April this year, and out of which 210 million are active users. So can we apply the same numbers to that app?

Advertisements

Stock Prices Plummet

When the news broke about how much Facebook paid for WhatsApp, Line, who is owned by South Korean Naver but most popular in Japan, price dropped. And it had nothing to do with investors being worried that Facebook will be a direct competitor in their region.

The initial drop may have to do with investors only valuing active users of messaging apps at $35 each, whereas the current market cap of Facebook values it roughly at $140 MAU (monthly active users).

How Much Line Is Really Worth

Line has stated that they were optimistic about being able to hit 500 million registered users by the end of 2014. We have no idea how many of these users are active though, since the app has never confirmed any numbers. Nomura, an asset capital corporation, figures that approximately 210 million users are active.

Nomura’s Eric Cha also explains that Naver’s, the company that owns Line, regular business is valued at $6.8 billion which leaves the $18.2 billion of their market cap as the assumed value of Line. This valuation prices Line’s active users at $87, more than double of what Facebook paid for Whatsapp.

It isn’t really clear whether Facebook overpaid for Whatsapp though, since different valuations are reaching different conclusions. But nothing is certain about Line either. They don’t report their active users or exactly how much profit they make, if any.

Advertisements

There is a rumor floating around that Line will look for a $30 billion IPO by mid-2014.

Was It Really Worth The Price

$87 is a huge sum per active user, especially assuming that international users are worth more than North American or Western users, but only if these users make in-app purchases.

When we think about how companies monetize their users, Asian companies are pretty far ahead in how they monetize compared to their North American counterparts.

This means that investors who know the companies in Asia well will value them much higher.

In Asia, apps like Line make their money by selling products such as games and stickers. Line recently did a group buying flash sale, kind of like Groupon, which was highly successful in Thailand. The lesson learned here is that if you get a group together, you can essentially sell to them. Americans tend to be less interested in in-app purchases though, since ads are constantly shoved into users’ faces.

In Asia, there is no reliance on ads to monetize. But lets remember that this is not the case with Whatsapp, which has always been ad free.

Who Is Worth More

We’re pretty sure that Mark Zuckerberg is incredibly smart, so it’s pretty obvious why he was glad to fork 10% of Facebook paying $19 billion for WhatsApp.

But will they be able to survive without in-app purchases? There is a trove of possible profit but at the same time, introducing paid features may drive users away. We think that WhatsApp will continue to be worth more if Line is unable to become more transparent about its active users and profit.

The post is written by Ilan Nass, a regular contributor to Dazeinfo. He is a tech enthusiast, who like to profile tech companies. He is an editor at Fueled – an iPhone and Android app development company based out of Chicago.

1 COMMENT

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Latest News

Decoding Slack Acquisition: A Move To Give Microsoft Taste Of Their Own Medicine?

The acquisition of Slack has left many surprised. The popular workplace messaging app Slack...

The Launch of ATT Feature Will Make Apple-Facebook Privacy Feud Nasty

Apple's firm stand has itched Facebook's co-founder Mark Zuckerberg. Much of today's internet usage has become heavily...

OYO, Pandemic and Future: CEO Agarwal Makes Big Claims

If there is one sector at which the pandemic really took a swing, it is the hospitality industry. But that's not the...

UPI Transactions To Cross Record 6.5 Billion In Q4 2020

The number of UPI transactions has crossed 2 billion mark in a second consecutive month. With that, it's clear that the number...

Facebook Acquires Kustomer: Social Commerce Is The Next Big Thing, For Sure!

In a bid to strengthen its social commerce’ arm, Facebook has recently paid top dollar for their recent acquisition.

New RTGS Rules To Boost The Adoption of Digital Payments

The government of India (GOI) has defined new RTGS rules for banking customers who largely rely on internet banking for a large...

In-Depth: Dprime

Will ‘TikTok By Microsoft’ Be A Winner?

For the last two years, TikTok has been in the public eye for all sorts of reasons. First, it was the exploded...

Facebook Subscription Model: Looking Beyond Ad Dollars?

Seldom do job listings create a stir this gripping. However, when the job listing in question is a stealth post from Twitter,...

Will The Online Food Delivery Market in India End Up Becoming A Two-Horse Race?

It's pretty much evident that the food delivery space in India is all set to get riled up soon enough as one...

More Articles Like This