Chat app Line doubles its stake in Snapchat clone Snow

Ahead of Snap’s eagerly awaited IPO, Line, one of the U.S. tech IPO highlights of 2016, has doubled down on sister service and Snapchat clone Snow.

Line and Snow both share the same parent company — Naver — but the two firms have increasingly become financially entwined. Line bought up 25 percent of Snow last September for $45 million, and now it is nearly doubling its equity to 48.6 percent, according to a filing. The deal values Snow at around $207 million (235 billion KRW), according a filing in Japanese, up from 200 billion KRW ($177 million) in September.

Line went public in a dual U.S.-Japan IPO that raised $1.1 billion. Shares initially popped 50 percent on the firm’s Tokyo debut, but there’s been little to celebrate since then. Line saw user numbers dip for the first time in January — despite a record year of revenue in 2016 — while its userbase increasingly limited to four countries: Japan, Indonesia, Taiwan and Thailand. Expanding its presence is an area where it feels that increased collaboration with Snow could bear fruit.

As part of this new deal, Line has agreed to give its photo app business to Snow — that includes selfie app B612, its core Line Camera app, food-focused Foodie, and its makeup preview app Looks — in order to “consolidate and improve the efficiency” of the services.

Line said in another filing that it has been working closely with Snow since its September investment but the competitive nature of photo and video apps means that this deal to combine many of their resources will help both Snow and the Line apps to grow.

Snow reached 40-50 million active users in January, with the app particularly popular in Japan, Korea and China. (Its rising popularity triggered investment interest from Facebook, which was rebuffed.) While Line hopes it may be able to tap into that success to boost its core chat app, it said that the camera apps have proven popular in markets like China, Japan, Vietnam, Indonesia, Brazil and Mexico. Given that each ties back into Line — although they can be used without a Line account — it is also betting that it can reverse its globalization struggles by giving these apps more freedom to grow via this deal.

Investors certainly seemed bullish. Line’s Tokyo share price reached 3,895 JPY at close on Friday, when Line made the announcement. That was up from 3,660 JPY at the start of the day. However, the share price dropped more than two percent when the market reopened on Monday.