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Can Japan's answer to WhatsApp take on the world?

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Free messaging service Line has taken Japan by storm over the past few years, but can the company, which is posing a very real threat to the hugely popular WhatsApp, continue to expand at such a rapid pace?

Last week, Line, a subsidiary of South Korea's Naver Corp, reported its global user base had surged to 300 million registered users, up from 150 million in April.

Last month WhatsApp said it had 350 million active users, by contrast.

'Active' users describes people who are actively using the app, while registered users refers to the amount of people who have downloaded it.

Fans say the app's cutesy stickers, often depicting baby animals and oversized emoticons, together with its games, are central to its appeal.

(Read more: Messaging apps hit gold as 'emojis' head west)

According to 30-year old Hiroko Yamakawa, who lives in Tokyo, everyone she knows in Japan is using the app, even her parents.

"I use it so much and it has now become essential to my daily life. I use this tool to communicate with my friends, family, colleagues... everyone," she said.

"I like it because the stickers are so good they express different emotions precisely, and it has sense of humor. I even sometimes only use the stickers to express my feelings," she added.

Line says 80 percent of its users are now based outside of Japan where it has 50 million users. In Southeast Asia it's already popular in Thailand, the Philippines, Indonesia and India. The company has also ventured into Western Europe and Turkey, and is popular in Hispanic countries including Spain and Mexico.

However, its user base is still outnumbered by WhatsApp in many countries. For instance, Line has 13 million users in India, in contrast to WhatsApp's 25 million, but it claims to have gained its 10 million in just three months, a statistic likely to the nerves of its competitors.

(Read more: Asian mobile chat apps challenge western dominance)

Its exponential rate of growth is astonishing. It took the firm 19 months to generate 100 million users, but it added another 100 in the next six months after that, and another 100 million again over the following four months, Line said.

There is no doubt that Line has enjoyed huge success in Japan and other global markets, but analysts told CNBC the firm could face challenges moving into markets where its brand presence is not as strong as its competitors.

"The main risk [to Line] is through the competition, from a growth perspective," Jiong Shao, regional head of internet research, at Macquarie Securities, told CNBC.

"If you are dominant in Japan, fine, but in order to grow further you may have to go to the Middle East or Indonesia. In these types of markets you are competing with either the entrenched guys or the other players," he said.

Gaining traction in a market where the brand is relatively unknown can be an issue for free messaging service providers, as they rely so heavily on 'word-of-mouth,' analysts told CNBC.

(Read more: Why most mobile apps can't be trusted)

Neo Sijin, a 23-year old student from Singapore, told CNBC she had downloaded Line but never ended up using it.

"I was attracted to Line because they had really cool stickers, and like Twitter, it allows you to update your statuses. But I soon got bored of it because I realized that no one uses Line and everyone is on WhatsApp," she said.

Macquarie's Shao said breaking into completely new markets could prove a challenge for Line, though he noted that it would be a challenge for every player in the space.

"If you don't compete as well, for whatever reason - it could be that you are not spending as much marketing dollars or you are not targeting the right users - that's the risk from the growth forecast perspective. All the new competitors want these same markets just as badly as Line does," he added.

But Shao pointed out that free messaging providers like Line and China's WeChat have an edge over WhatsApp because their strategies have more room for growth from a monetization standpoint.

A spokesperson for Line told CNBC their main area of growth was Europe at present, but they expected growth to be steady there rather than dramatic.

"Certain countries may prove to be quite a challenge, so we are taking it one step at a time," the spokesperson added.

(Read more: Yahoo's acquisition spree all about tackling mobile)

Line makes most of its money through selling its stickers and games, earning around $10 million a month from sticker sales, while WhatsApp's main source of revenue is derived from its initial one-off charge to download the application.

"Line and WeChat and all these other players have formed a new path to prosperity. They have used the messaging as the glue and have built that out into a social network. Now Line makes most its money from games and who know what's next?" he added.

Line reported third-quarter gross revenue of $165 million, up 50 percent on the previous quarter. The company is rumored to be considering an IPO worth $10 billion, but the rumors have not been confirmed, Reuters reported last month.

Some media outlets, including tech blog TechCrunch, have questioned the validity of Line's user numbers, arguing that Line counts both registered and active users together, and also double counts users if the same user is using Line on two different devices, implying the figures are inflated.

When contacted by CNBC, Line did not refute the fact that it counts both registered and active users in its user statistics but said the proportion of active users was high, at 85 percent in Japan, for example.

By CNBC's Katie Holliday: Follow her on Twitter @hollidaykatie

Correction: An earlier version of this story stated that Line's user base was 50 million users behind WhatsApp. This was an unfair comparison as Line has reported 300 million registered users, while WhatsApp have reported 350 million active users.

Line has been contacted by CNBC for data reflecting its active user base. The firm said 85 percent of its Japanese users are active, but was unable to give an overall figure.

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