Mark Zuckerberg recently outlined a strategy that would see the future of Facebook in private messaging. Shin Jung-ho, the reclusive founder of the US company’s Asian rival Line, made that decision eight years ago when the messaging app burst on to the scene after the Tohoku earthquake and tsunami in March 2011.
As Mr Zuckerberg looks to merge the messaging services of Facebook, WhatsApp and photosharing platform Instagram, Mr Shin is now spearheading Line’s expansion into payments, banking and other fintech businesses in an expanded role as co-chief executive.
Driving Line’s transition is a fear that the group, which now has more than 7,000 employees, will become complacent, stagnant and less innovative.
“My biggest priority is to ensure that the company is in a constant position to deliver innovation,” Mr Shin told the Financial Times in an interview. “As cases in the US and Europe show, the fear is that we will become big and sluggish.”
Line, which is 73 per cent owned by South Korean internet search group Naver, is at a crossroads.
Line’s net losses in 2018
The messaging service known for cutesy stickers and characters such as Brown the bear has become so widely adopted in Japan that it is used by consumers not only to communicate and play games but also to make payments, buy insurance and find jobs.
Its success is driven by growth in advertising revenue and a focus on Asia, where it has 164m monthly active users in its core markets of Japan, Taiwan, Thailand and Indonesia.
Over the past year, the company has outlined plans to invest heavily in new financial services and artificial intelligence, forming partnerships with companies such as Nomura and Mizuho Financial Group. Line Pay, its mobile payment system, is a big part of that push, backed by Japanese government efforts to double cashless payment rates by 2025.
The company has pledged to make its fintech businesses profitable in three years but the new strategy has made some investors uneasy about whether the costly bets will pay off. Last year, the company booked a net loss of ¥3.7bn ($33.5m), its first annual loss since its $1.3bn dual listing in Tokyo and New York in 2016.
“There are challenges to expanding into new areas like fintech and payment,” said Mr Shin. “But if users want this and it is an area where we can contribute to improving their lives, we need to take on the challenge even if there are some risks.”
In a recent report, CLSA analysts said Line’s move was ambitious but also defensive: “Management is mindful about the changing industry paradigm that could make pure mobile messaging app services vulnerable to replacement.”
In order for the company to grow, said Masato Araki, an analyst at Mitsubishi UFJ Morgan Stanley Securities, Line’s bold investments need to be backed by an expansion of its core advertising business. “In our opinion, however, strong growth is unlikely over the longer term because of rising operating expenses and ongoing upfront investments.”
Investor scepticism is not new for Mr Shin, who joined Naver in 2006 after a start-up he founded was acquired. Two years later, he was sent to Tokyo to revive its web search business, which had been shut down in 2005.
The breakthrough for Line came five years later when the company shifted its focus to smartphones and launched a messaging app after the 2011 earthquake and tsunami disrupted telephone services.
A critical part of his new position, according to Mr Shin, is to cement the group’s “fearless” corporate culture to survive a rapidly changing industry in which Line is massively dwarfed in size by WhatsApp and Tencent’s WeChat, which both command more than 1bn monthly active users.
“What Line is worried about the most is not the lack of resources to hire exceptional people but whether we can offer the kind of innovative environment for the top talent we have hired to continue taking on challenges,” Mr Shin said.
The 47-year-old noted that Facebook’s shift in strategy was “quite late” but he admitted the US rival was a major threat as the industry competes to create a one-stop-shop where users can send messages, make payments and transact with businesses within the confines of a single mobile app.
“Considering Facebook’s scale and the number of users, there’s no mistake that they are a formidable competitive threat,” Mr Shin said. “But we have spent years trying to understand the needs of our user base and I am convinced we can offer services that are even more satisfying to our users.”