Global e-Business Association

The e-Business Studies - Vol. 17 , No. 5

[ Article ]
The e-Business Studies - Vol. 17, No. 5, pp.21-38
Abbreviation: The e-Business Studies
ISSN: 1229-9936 (Print) 2466-1716 (Online)
Print publication date Oct 2016
Final publication date 30 Oct 2016
Received 08 Oct 2016 Revised 22 Oct 2016 Accepted 27 Oct 2016
DOI: https://doi.org/10.20462/tebs.2016.10.17.5.21

The Importance of Platform Business Model in the Mobile Industry: Naver’s LINE App and the Mobile Instant Messaging Market
Junic Kim*
*Teaching Professor, Management of Innovation Program, Department of Convergence Science, DGIST, Daegu, Republic of Korea (junic.kim@dgist.ac.kr)

모바일 산업의 플랫폼 비즈니스 모델 중요성 연구
김준익*
*DGIST, Teaching Professor (junic.kim@dgist.ac.kr)

Abstract

This study explores the role and importance of the platform business model in capturing benefits as well as value in the mobile industry through a case study of the mobile instant messaging (MIM) market and Naver’s LINE messaging app. Unlike other business models, the platform business model has three key features: stability for platform providers by virtue of its various revenue streams, opportunity for business expansion for content providers (supply side) through its business ecosystem and ability to satisfy customer needs (demand side) by offering a variety of content services. This study concludes that the platform business model generates healthy profit and value and that it creates network effects and a viable business ecosystem. It also finds that the mobile industry is a conducive environment for the implementation of the platform business model and, hence, the core reason why the model is a key innovative business model and strategy for this industry.

초록

본 연구는 모바일 산업의 발전에 따른 플랫폼 비즈니스 모델의 역할과 중요성 역할에 대해서 논의해보고자 한다. 오늘날 플랫폼 비즈니스 모델은 다양한 가치를 창출하고 수익모델을 극대화 하는 전략으로서 각광받고 있으나, 기존 선형 비즈니스모델과는 달리, 양면시장 이론에 기반하고 있기 때문에 훨씬 복잡하고 다양한 비즈니스 구조를 지니고 있다. 이에, 본 연구에서는 최근 시장에서 주목 받고 있는 라인과 1억 다운로드가 넘는 글로벌 모바일 인스턴트 메신져(MIM) 총 8개 기업들의 서비스 및 수익 모델 분석을 통해 플랫폼 비즈니스의 특징과 중요성을 알아보고자 하였다.

연구 결과, 플랫폼 비즈니스 모델은 안정성과 확장성, 그리고 만족감 이라는 핵심 특징을 보유하고 있었다. 플랫폼 운영자에게는 다양한 수익모델 구축을 통한 안정성을, 콘텐츠 공급자에게는 경영 생태계 구축을 통한 확장성을, 그리고 사용자에게는 다양한 콘텐츠 및 서비스 제공으로 만족감을 제공하면서 빠르게 시장을 장악하는 모습을 보였다. 특히 모바일 산업에서는 네트워크의 확산으로 인해 플랫폼 비즈니스가 더욱더 중요해짐을 알 수 있었다. 각 이해관계자들에게 안정성과 확장성, 그리고 만족감을 제시하여, 플랫폼 참여자들을 기반으로 생태계를 구축한다면, 더욱더 성공적인 플랫폼 비즈니스를 발전시킬 수 있다는 결론을 도출할 수 있었다.


Keywords: Platform business model, Mobile Instant Messaging, Two-Sided Market, LINE
키워드: 플랫폼 비즈니스 모델, 모바일 메신저, 양면시장, 라인


Contents
ABSTRACT
Ⅰ. Introduction
Ⅱ. Literature Review: The Platform Business Model and Innovation
Ⅲ. Methodology
Ⅳ. Data Collection and Analysis
Ⅴ. Findings
Ⅵ. Discussion and Conclusion
References
국문초록


Ⅰ. Introduction

Platforms are exceedingly important technological and strategic innovations in the new millennium and have helped create sustainable growth in the information and communication technology (ICT) industry as well as in other industries. Platform businesses in which various stakeholders participate and innovate have become an essential strategy in industry because consistent innovation is necessary in today’s era of limitless competition and complication (Evans and Schmalensee, 2007). In particular, platform businesses are capable of generating a positive chain reaction among their users and sellers (Evans et al., 2008). Each stakeholder of a platform-based business model is interdependent and complementary to each other. Furthermore, platforms catalyse a virtuous cycle: more demand from one side stimulates further demand from the other side (Eisenmann et al., 2006). Once implemented, the business scale and the number of participants of a platform can grow in geometrical progression. A platform provider offering a platform-based business model to its stakeholders can create an industry ecosystem which is greater than the sum of its parts (Cusumano and Gawer, 2002). Most academics and industry professionals would have heard the term ‘platform’ used with reference to a foundation or base of common components around which a company builds a series of related products (Cusumano, 2010). Such a platform business strategy has become a crucial academic and industrial topic since the late 1990s, especially for researchers exploring the costs and benefits of modular product architectures and component reuse (Suarez and Cusumano, 2011). In mobile and ICT industries in particular, the platform business model has become a crucial strategy for attaining a sustainable revenue source as well as for developing new markets (Kim, 2014). For instance, Google and Amazon have become the most valuable technology companies in the world through the implementation of their platform strategies.

Hence, ‘platform’ has become a buzzword, and numerous companies are seeking to emulate these technological giants by offering their own platform services to the market, particularly companies in the mobile industry. The platform business model is the latest ‘big thing’ in this industry owing to the rise in the usage of various multimedia services, content and applications. However, despite the strong need for platform businesses in the mobile industry, related studies have accomplished little thus far in academia. Due to such gaps between industry and academia, companies are struggling to understand platform businesses as a viable strategy. This is the rationale for this study, which aims to examine why the platform business model brings success for mobile companies through an analysis of the MIM market, one of the most issue market in the mobile industry.

For this study, the MIM market and Naver’s LINE app have been chosen as a key case study to analyse why the platform business model has become a core strategy in the mobile industry. There are two critical reasons behind this decision. First, the MIM application market is growing very quickly due to its provision of a variety of services such as text messaging, file exchange, group chatting and video conference. In early 2014, Facebook acquired WhatsApp for $19 billion, a value that is higher than Google’s biggest deal (its purchase of Motorola Mobility was for $12.5 billion). This clearly demonstrates how ICT companies regard the MIM market as the next big cash market. If we recall the Facebook and Twitter phenomena, it is critical for messaging apps to scale up fast to make an impact in the market. Second, Naver’s LINE app, originally a simple MIM service, has now become the most popular MIM application globally despite being a second mover in the market. It achieved this after it decided to adopt the platform business model as its core strategy. LINE achieved 480 million users as of 16 July 2014 and aims to have 700 million by the end of 2016. It is growing faster than Facebook and Twitter.


Ⅱ. Literature Review: The Platform Business Model and Innovation

The most critical points of business models and innovation are value creation and the capture of that value (Tidd and Bessant, 2011; Schilling, 2005). According to Chesbrough and Rosenbloom (2002), a business model describes the position of the firm within the value network linking suppliers and end-users. Hence, innovation researchers would examine ways to encourage this value network between suppliers and end-users to create value (Montelisciani et al., 2014; Holzmann, Sailer, and Katzy, 2014; Chesbrough and Rosenbloom, 2002). As a result of researchers addressing this issue, the platform business strategy has recently become a key innovation research topic as well as a significant pillar in innovation studies (Boudreau and Lakhani, 2012).

1. Definition of the platform business model

However, due to the lack of an academic definition of the term ‘platform’, it is necessary to first explain what a platform is. This study uses the term to refer to a technological platform such as Apple iTunes, Google Android or Amazon Kindle Fire Ecosystem (Gawer, 2014). A platform serves a two-sided network (Eisenmann et al., 2006), whose necessary condition is that the Coase theorem does not apply to the transactions between the two sides. Factors conducive to such two-sidedness include transaction costs among end-users (Rochet and Tirole, 2004). Furthermore, the intangible nature and information-based content of services mean that Information Technologies (IT) would occupy a central role in innovation activities (Miles, 1993). West (2003) described the platform as an architecture of related standards that allow the modular substitution of complementary assets such as software and peripheral hardware. Further, Iansiti and Levien (2004b) stated that the platform is a ‘package’ through which keystones share value with their ecosystems. To explain the concept of a platform business, a new research theory, called two-sided markets, has been introduced in the field of industrial economics (Rochet and Tirole, 2003; Caillaud and Jullien, 2003; Roson, 2005; Armstrong, 2006). Eisenmann et al. (2006) and Gawer and Henderson (2007) asserted that as a system, a platform combines groups of users in two-sided networks. Eisenmann et al. (2008) stated that a platform consists of a set of rules and components, while Cusumano and Gawer (2013) argued that ‘a key distinction between supply chains and industry platforms is that in the case of industry platforms, firms are developing complementary innovations.’ A platform business model is likely to involve a ‘transaction’ occurring on a platform, and the ‘network effect’ emerges from this ‘transaction’ as it creates value by facilitating interactions among the different sides. Furthermore, this ‘network effect’ creates a ‘business ecosystem’. That is, a platform business model is aligned with the occurrence of transactions, the network effect and the business ecosystem sequentially.

2. Importance of the platform business model

A platform business generates value primarily by enabling direct interactions between two or more distinct types of affiliated customers; in such a case, it is known as a multi-sided platform (Evans et al., 2008). The platform provides an essential, or ‘core’, function to an encompassing system of use, and it has become a crucial strategy for achieving a sustainable revenue source, particularly in the ICT and mobile industries. Gawer and Cusumano (2002), Cusumano and Gawer (2002), Evans, Hagiu, and Schmalensee (2008), and Eisenmann, Parker, and Van Alstyne (2006) have all proposed strategies for utilising platforms to take the lead in industries. Jacobides, Knudsen, and Augier (2006) emphasised that platforms are crucial because they create value and become important parts of an industry structure. Most business models in the ICT and mobile industries started from a service offer that provides and sells the service; this is also known as a linear business model. Once a sufficient number of users have been assured of the service, companies would attempt to adopt and transmute into a platform business model as their key strategy, whereupon such a business model would be expected to expand. Many significant cases exist. Having switched to a platform business model from a service offer model, Amazon, Facebook, Twitter and Google have all become among the wealthiest technology corporations in the world. These companies knew how and where their platforms were supplied to the market. Regardless of size, platform providers build a transaction place and provide a variety of content and services for personal computers, mobiles, tablet PCs and other electronic devices (Gawer and Cusumano, 2013).

3. Literature gaps and research objectives

Through the literature review in this study, the author has analysed the characteristics of the platform business, which has become a crucial research subject in academia as well as an important strategy adopted by industry. Firms seek to implement a platform business model as their key strategy to encourage continuous innovative development of complementary products, to tap into new markets and to assume a leading position in those markets. However, contrary to firms’ expectations, the author has further identified huge research gaps. Even though the importance of the platform has increasingly grown in the mobile industry, an industry which requires rapid business environmental changes and has low entry barriers, there are limited empirical studies that focus on the mobile market, particularly from the viewpoint of content service providers. Furthermore, there is a lack of literature on value and revenue streams despite this being crucial for the study of business models. Therefore, this study focuses on the role and importance of platform business models which create revenue and value for each platform stakeholder.


Ⅲ. Methodology

Through the literature review in this study, the author has analysed the characteristics of the platform business, which has become a crucial research subject in academia as well as an important strategy adopted by industry. Firms seek to implement a platform business model as their key strategy to encourage continuous innovative development of complementary products, to tap into new markets and to assume a leading position in those markets. However, contrary to firms’ expectations, the author has further identified huge research gaps. Even though the importance of the platform has increasingly grown in the mobile industry, an industry which requires rapid business environmental changes and has low entry barriers, there are limited empirical studies that focus on the mobile market, particularly from the viewpoint of content service providers. Furthermore, there is a lack of literature on value and revenue streams despite this being crucial for the study of business models. Therefore, this study focuses on the role and importance of platform business models which create revenue and value for each platform stakeholder.

This study takes the form of case study research conducted over six months. Case study research is considered a good means to generate novel theory and to adapt ideas (Eisenhardt, 1989). Hartley (2004) indicated that case study methodology is particularly appropriate for research questions which require a detailed understanding of organisational processes in business because of the rich data collectable in that context. It allows a great amount of detail to be collected that would not ordinarily be easily obtained through other research designs (Yin, 2009) and also enables the collection of much richer data of greater depth than that gathered through other methodological designs. Moreover, it is able to provide an intimate sense of things, ‘how they feel, smell, seem’ (Mintzberg, 1979). Therefore, the use of a case study approach is appropriate for this research as it analyses with a view to identifying issues and generating insights (Bryman and Bell, 2011).

This research concentrates on presenting the results of a case study of Naver’s LINE app. During the six months of research, the company’s business model, strategies and revenue streams were examined, covering most stakeholders. In addition, a detailed database of other competitors was assembled. Seven important competitors were specifically chosen: WhatsApp, Viber, Tango, Nimbuzz, Kik, Kakao and WeChat to conduct a comparative analysis. All these messaging services were selected based on recent records of registered users; each competitor has over 100 million registered users. The cases were chosen as they are indicative and were selected using purposive sampling, with each illustrative (Flick, 2014; Patton, 1990). Choosing a single case is not uncommon in research studies for practical reasons (Daymon and Holloway, 2002). Moreover, because this research has ‘intrinsic value’ (Stake, 1995), a single case can constitute a very powerful example and may be regarded as sufficient (Siggelkow, 2007).

To improve the validity of this study, triangulation, or ‘the combination of methodologies in the study of the same phenomenon’ (Denzin, 1970), was conducted for data collection. Triangulation is a powerful research technique which facilitates the validation of data through cross verification from two or more sources (Bogdan and Biklen, 1998). First, document reviews were conducted and based on these results, interview data and internal company reports were analysed. This analysis process helps minimise subjectivity of the data, which, in this study, were gathered from interviews and observations as well as from internal documentation and email communications (Flick, 2014; Yin, 2009). The case study followed the research procedures designed by Eisenhardt (1989) and Yin (2009), and questionnaires were drawn up for the interviews. Finally, the research findings were validated through the results of the case study research (Flick, 2014).


Ⅳ. Data Collection and Analysis

MIM services are rapidly gaining popularity worldwide, and this growth has had a huge impact on the mobile and ICT industries. These services were predicted to carry in excess of 50 billion messages per day in 2014, twice the volume of messages sent via SMS at 21 billion messages per day (AnalysisMason, 2013). WhatsApp alone recorded 10 billion outgoing messages per day in 2013 (Statista, 2014). Recognising the potential of MIM services, Japanese online retailer Rakuten acquired Viber for $900 million in 2014, and in the same year, Tango secured a funding of $280 million from the Alibaba group. This is evident of the explosive growth experienced by the MIM market, and despite Naver’s LINE being a second mover, it is nevertheless demonstrating incredible growth as well. LINE is a product of South Korea’s Naver Corporation and was developed in South Korea and Japan. As an MIM application, it offers free one-to-one and group messaging, as well as free domestic and international voice and video calls. Since its launch in June 2011, the LINE application has grown into a global service utilised in 230 countries and ranking number one in the free app category in over 60 countries. It recently achieved another milestone of 480 million users across the world, with 50 million in Japan, 24 million in Thailand and 20 million each in Taiwan and Indonesia.


[Figure 1] 
Trends of registered users of eight important MIM applications as of July 2014

* Source: GlobalWebIndex /WeAreSocial /Whatsapp Blog / Tech in Asia / ExperianZ / eMarketer / Distimo / Interview data sources



The graph above shows the growth of registered users through an analysis of eight MIM applications with 100 million users as of 20 June 2014. As can be seen in the graph, LINE has a tremendous growth rate compared with other MIM services, despite being the latest mover. LINE, which has signed on 480 million users within three years of its launch, has outperformed competitors with larger markets, such as WeChat, an MIM service which mainly focuses on the Chinese market with a population of over 1.3 billion. LINE is tremendously popular in Asia and has more than doubled its user base over the past year as it aggressively expanded into the European and US markets (Solomon, 2014). For instance, LINE shot from 36th place to first place in Spain's Apple App Store, whereas WhatsApp, which was in fifth place on 21 February, had dropped to 19th place by 23 February (Ballave, 2014). LINE also ranked first on Google Play. According to a Business Insider report (2014), LINE gained two million new users in Spain in January 2014 while WhatsApp was out of commission. LINE’s user base has grown rapidly not only in Spain but also in other European countries, with the app achieving incredible success on the App Store and Google Play in Germany, Belgium, Sweden, Finland and the Netherlands (Naver, 2014).

As a result of its data analysis, this study found that LINE’s primary advantage over its competitors lies in its value and revenue creation, which has been a major challenge in the MIM market. The platform business model allows the company to monetise its contents and create new revenue streams across multiple, integrated channels. Once it had secured enough registered users, LINE created its platform to fulfil the provision of value-added services and additional businesses based on these users. Given the prevailing business environment, LINE expanded its business through the provision of a variety of services such as Games, Stickers, Music, Advertisements and so on. In particular, it offered an Open Application Programming Interface (API) to attract third-party content providers. In an interview with Japanese broadcaster NHK, the CEO of LINE, Morikawa Akira, mentions ‘Our goal is to provide all kinds of useful applications through LINE’. With its platform business model creating various revenue streams, LINE has been able to generate a healthy profit and value. While other MIM applications face financial deficits and major obstacles to their profit creation, LINE has generated a profit of $144 million in the first quarter of 2014, three times more than the previous year (Naver, 2014). This revenue growth has been derived from games, in-app purchases and monthly fees charged to companies for official accounts that enable them to send promotional messages through the app. In essence, LINE is in a position to create a variety of revenue streams because it had adopted the platform business model, which enables significant revenue innovation. Table 1 below illustrates how LINE has significantly more revenue streams compared with its competitors, due to its different revenue-generating services.

<Table 1> 
Different revenue generating opportunities and services
Types LINE Kakao WeChat WhatsApp Viber Tango Nimbuzz Kik
Paid for Subscription No No No Yes No No No No
Ad Yes Yes No No No No Yes No
Official Accounts Yes Yes Yes No No No No No
Paid Stickers Yes Yes Yes No Yes Yes Yes Yes
Sponsored Sticker Yes Yes Yes No No No No No
Other Contents Yes Yes Yes No No No No No
Game Yes Yes Limited No No Limited No No
Music Yes Yes No No No Limited No No
E-Commerce Mall Yes Yes Limited No No No No No
* Source: Each companies’ annual report, website and blogs / Interview data sources

One distinctive feature of LINE’s platform business model is that the app does not make money from direct sales. Instead, it builds a marketplace and secures revenue streams through transactions in that marketplace. LINE demonstrates the power of the platform business model by achieving profitability in a short period in the MIM market, which has been in deficit for a number of years. In 2013, LINE’s net sales reached approximately $443 million, excluding a 30% commission paid to application channels such Apple’s App Store and Google Play, and it recorded an exceptional surplus. This study’s findings from the interviews conducted and internal data collected show that LINE has three different revenue models (See Table 2). The first revenue model is advertisements, which account for 20% of total revenue; the second revenue model is stickers, which make up approximately 20% of total revenue; the third revenue model, applications, makes up 60% of the revenue in total. LINE has eight different revenue streams (See Appendix 1), significantly more than its competitors, who have only one or two. Given its numerous revenue streams, LINE is able to secure sufficient profits and market expansion as well as meet its users’ needs by offering various services. Jeanie Han, CEO of LINE Euro-Americas, has said that ‘LINE is really a platform that can make your life more fun, not just a simple messaging app. In keeping with this platform approach, LINE is available on multiple mobile platforms.’

<Table 2> 
Analysis of sales and revenue models (See Appendix 1)
Product Advertisements Stickers Applications
(included Games)
Ratio of revenue 20% 20% 60%
Revenue Streams 1) Official Accounts and LINE@ 2) Paid Stickers
3) Sponsored Stickers
4) Other Contents – Deco and Themes etc.
5) Game
6) Music
7) E-Commerce

The first revenue model, advertisements, largely consists of official accounts and the LINE@ service, which offer brand advertisements as opposed to the banner advertisements mainly used in the mobile sector. Both services are similar in terms of brand promotion and customer acquisition through managing LINE accounts, but their target markets are different; official accounts are for large companies while LINE@ is for SMEs. Their price and ad impressions also differ. In the case of the second revenue model, stickers, LINE provides users with more than 300 different types of stickers and has expanded its sticker service earnings by partnering with licensees of popular cartoon characters and well-known international illustrators and designers. This has resulted in highly localised sticker sets tailored to individual preferences. With its third revenue model, applications, LINE has provided 47 games in many supporting languages since 2013 and runs Cartoon, Theme, Deco, Music and Line Mall features that facilitate transactions among users. This in turn leads to the participation of users, developers and companies. To avoid a subordinate relation with OS platforms, such as Android and iOS, and to access third-world countries lacking online payment systems, LINE recently started to operate its own web store known as LINE STORE, where customers can buy digital content without transacting through the app market. This demonstrates LINE’s intention to cement its position as an independent platform provider.

By expanding and developing a wide variety of content and contacts for business users through a value-based business model, LINE has utilised the platform business model in the mobile and content industries to form a business ecosystem and ensure its leadership within it. Despite the MIM market’s expansion and unlike other companies that have faced difficulties in seeking and activating revenue models, LINE seems to have discovered a successful value and revenue creation model. This is immensely important as a key model for the development of mobile ecosystems.


Ⅴ. Findings

LINE is particularly impressive as a new platform business model because it is one of the first companies to establish a platform strategy in the MIM market, which is rapidly growing within the mobile industry. Unlike other MIM applications which focus only on the message delivery function, LINE has adopted the platform business model . It has also decided that the core function of the mobile business is ‘communication’ and utilised its MIM service to implement this. Its reasoning behind adopting a new mobile platform based on an MIM service is to secure as many users as possible within a short period and to compel them use its service for their mobile communication. To sign on many users, LINE decided that it was imperative to provide variety in terms of content. It secured this through a platform business model, which also enabled the company to tap on new revenue streams. LINE’s platform business model is a distinctly different business strategy from that of WhatsApp , a precursor of MIM, and its other competitors. Due to its unique business model strategy, LINE is more likely to secure much content in a short time and grow rapidly, as well as raise its corporate value and revenue by securing a variety of revenue streams. Thus, despite being a second mover, LINE now dominates and leads the market.

As an independent platform provider, LINE has been able to build various revenue streams, provide a variety of content services to its customers and expand new businesses. Unlike other business models, the platform business model provides each player with three key features; stability for platform providers by virtue of its various revenue streams, business expansion opportunities for content providers through its business ecosystem and the ability to satisfy customer needs by offering a variety of content services. This is the main reason why LINE has been able to move ahead of its rivals so rapidly despite its second-mover status (See Figure 2).


[Figure 2] 
The SES (Stabilisation-Expansion-Satisfaction) effect of the platform business model

The distinctive feature of the platform business model is that it does not generate revenue through direct sales. Instead, it builds a marketplace and derives profits and value through the transactions in this marketplace; this is the platform business model strategy. LINE demonstrates the effectiveness of the platform business model by adopting it for the MIM market, which holds tremendous potential despite its continued deficit.


Ⅵ. Discussion and Conclusion

LINE offers a prime example of how the platform business model’s core feature is to support a multi-sided business. A multi-sided business, such as a marriage bureau or a shopping mall, creates value by connecting diverse customers and groups together on one platform (Evans et al., 2008). Likewise, the platform business model provides a service to both producers and consumers and gathers them onto a ‘platform’ using a variety of inducements such as games, content and profits. It offers a marketplace: one side sells something to the other. This multi-sided structure has multiple and distinct user groups that provide each other with network benefits (Parker and Van Alstyne, 2005), which results in a positive correlative relationship: an increase in customers on one side results in a corresponding increase on the other side and vice-versa. Therefore, to ensure the success of a platform business model, platform providers would offer their platform service at a reduced price, or even for free, to one side of customers to entice the other side. The offer of discounted services to privileged customers would help encourage their participation, and due to network effects, other customers will eventually be enticed to participate on the platform. In the case of LINE, it provides its MIM service to end-users (demand side) for free and then offers this secured pool of end-users to developers and content providers (supply side) to induce them to participate on the platform. In other words, the platform business model provides clear benefits and value for each platform stakeholder. It provides ‘expansion’ value to the supply side through its business ecosystem, and ‘satisfaction’ value to the demand side through various content services. By offering benefits to both sides of the market, the platform provider is able to tap on various revenue streams, which in turn enables it to benefit from ‘stabilisation’ value.

There are two major reasons why the platform business model is especially important for the mobile market. On the one hand, the market comprises of numerous participants and stakeholders (Evans et al., 2008), such as device manufacturers, software providers, solution and application providers, content providers, end-users, advertisers etc. Thus, it has a more complicated value chain system compared with other markets. To provide profit and value to these various market participants, the platform business model must constitute a good business strategy. On the other hand, the mobile market is one of the world’s most rapidly changing industries, one which requires multimedia services, quick and timely device development, various applications and solutions, fast data processing and wireless network speeds, adoptable software and so on. Thus, it needs to supply diverse technologies, content and services to keep up with the rapid market changes (Christensen et al., 1998). To achieve this, the platform business model plays a key role in the business ecosystem by constructing a mutual, cooperative model for various participants in the mobile market. In addition, the platform business model offers high strategic value not only to the mobile industry but also to other related industries. As a consequence, the platform business model should be a key business policy and for many different converging industries.

This research has attempted to ascertain the importance of the platform business model, which has become a cause celebre in academia and industry, via a case study of MIM services such as LINE. Given the fact there have been limited studies on such a business model in the mobile industry, it is hoped that this study would assist both academia and industry in understanding its applications in the mobile industry. Henceforth, more generalisable research results could be possible through further studies, which could extend to the analysis of companies with a similar business model.


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Appendix. LINE’s seven monetisation methods
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1) Official Accounts and LINE@

Official Accounts and LINE@ functions provide official partners with direct access to users. Official partners, such as brands, celebrities and merchants can connect, exchange messages and share content with users. The benefit of Official Accounts for partners is that they can take advantage of the close relationship with users by including prizes, news, special coupons or discounts. This arrangement exists in countries across the globe. For instance, LINE has provided FC Barcelona with an official account and sponsored stickers, and users are able to download a free FC Barcelona sticker pack in exchange for adding the FC Barcelona Official Account as a contact. Partners pay to create Official Accounts and to promote them. Official Accounts consist of two types: Official Accounts for large firms and Line@ for SMEs.

Cost: Initial Fee of 2 million yen, monthly fee from 1.5 million yen.

Business Stickers: 10 million yen.



<Official Accounts>



<LINE@>

Stickers
2) Paid Stickers

Paid Stickers are pictures and animations used by users to embellish their chats to express their emotions. They are small but visually very rich. When LINE users were interviewed, one Spanish user explained her reason for preferring to use stickers on MIM: ‘We Spaniards like to express our feelings using our bodies and facial expressions; the stickers are very cool. I can never stay angry at my boyfriend for long if he sends me a cute sticker’. One Korean LINE user also stated ‘I choose stickers instead of words when I need to express my feelings to friends’.

The paid sticker business is one of LINE’s core revenue streams. According to a Naver business report in 2014, LINE earned $10m per month from stickers alone in 2013 (Naver, 2014). Moreover, it recently raised its sticker service earnings by partnering with licensees of popular cartoon characters and well-known international illustrators and designers to provide highly localised sticker sets tailored to individual preferences (Yarow, 2014). This service is highly effective in expanding its market around the world, with stickers featuring popular local characters contributing to the growth in LINE user registration in different regions. There are two types of stickers: free stickers and paid stickers. Free stickers drive awareness and induce users to buy the paid stickers. Paid sticker packs are priced at around $1.99 per pack and usually consist of a combination of the app’s own-produced content, content from external companies and individually produced content.

3) Sponsored Stickers

Sponsored stickers enable brands to offer free stickers for users to carry out content sharing on their behalf. They are usually used for promoting new music, movie artists and cartoon characters. It can be monetised by charging for access to users or brands and payment per download.



<Paid Stickers>



<Sponsored Stickers>

Applications (including Games)
4) Other Content: Deco and Themes etc

LINE provides a variety of content sources. For instance, users can purchase special themes and wallpapers to decorate their LINE chat rooms. It is easy to add new content, although the revenue generated is likely to be less than that earned through paid and sponsored stickers.

5) Games

The Games business is a main revenue stream that accounted for 60% of LINE’s profits in 2013 (Naver, 2013). LINE Pop, LINE Pokopang, LINE Bubble, LINE Cookie Run, LINE Rangers and LINE Disney Tsum are popular game titles and are available in many languages. Users are likely to download games and play with their LINE friends on the LINE platform. For instance, LINE Pop has been downloaded more than 32 million times and earned $43m in total revenue, while LINE Bubble has been downloaded 25 million times and earned $19m in total revenue. Revenue is mainly generated through in-app purchases of items and in-app advertisements.



<Other Contents – Deco and Themes etc.>



<Games>

6) Music

LINE had a firm plan to launch a music service in the first half of 2014 to provide streaming and downloading services within the LINE app. This is to be included as a basic function for the app. Users are able to listen and share music with their LINE friends. To download or listen to the music, users have to pay.

7) E-Commerce Mall

LINE Mall is a mobile open market where all LINE users can buy and sell products. Its main feature is that all sales and payments are conducted via mobile devices. Both individual and company accounts sell used and new products, and LINE receives a 10% commission on sales.



<Music>



< E-Commerce Mall>