Line, the Japanese messaging app with 500 million registered users, and China’s Tencent, maker of the 600-million user WeChat messaging app, are teaming up to invest in getting more content on their platforms — and less for their competitors. The pair have invested $110 million in 4:33 Creative Lab, a games studio based out of Korea. The news was originally reported in the Korean press (via Korea Herald and Business Korea), and we have today confirmed the details with Takeshi Idezawa, the COO of Line.
“We’re just getting started on our global investment strategy. We’re going global hand in hand,” he said of the deal.
The investment is strategic on a couple of levels.
First, it will give Line and WeChat direct access to original games. This is important since both companies have built out messaging apps that act more as communication and content sharing platforms (think Facebook rather than Facebook Messenger). That business has seen them extend not just into gaming and media but also other kinds of content like paid-for stickers, and a wave of other services like voice calls, payments and even taxis (no comment from Idezawa on whether that will lead to a deal with the likes of Uber or Lyft).
But for Tencent, business growth in WeChat and its gaming business both appear to be slowing, which is leading the company to launch and invest in other things. Those moves have included a partnership with Warner Group for music distribution in China and a new VoIP app.
Line posted revenues of $192 million in the last quarter on an monthly active user base of 170 million. It has had its own track record of investments and partnership to grow those numbers, including a $100 million deal with gaming company Gumi, and it also announced last month a JV with Gree called Epic Voyage to develop and operate mobile games.
The 4:33 deal will feed nicely into both of those strategies.
The other area where the investment is important is that investing in 4:33 will likely mean that Tencent and Line will get in front of another rival, Kakao, for the biggest and best games. Kakao had been working closely with the studio, and popular titles developed to date for the Korean messaging app include Blade and SandStorm.
With Facebook now owner of WhatsApp and effectively in possession of 1 billion monthly app users between that and Messenger, the space is clearly heating up. But there is also going to be a push for consolidation in the wider aim for critical mass. A partnership between Tencent and Line — which has found it hard so far to really break through in markets outside of Asia (it only has 25 million users in the U.S. right now for example, and 50% of its users are in Japan, Thailand and Taiwan, with 60% of revenues from Japan alone) — does raise questions of whether the services could also join forces to bulk up against the world’s biggest social network.
That’s not a question Line is willing to entertain for now, at least publicly. “Right now we are well funded by our owner,” Idezawa says — referring to the Korean giant Naver, “and are just focused on growth.”