Asian mobile chat apps challenge western dominance

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Nguyen Tung Lam, a 16-year-old high school student in Hanoi, uses Japanese mobile messaging service Line to chat with his girlfriend because she "likes the cute icons such as the teddy bear and bunny".

Doan Nguyen Trang, another Vietnamese teenager, prefers South Korea's KakaoTalk app because it is promoted by a wildly popular Korean boy band.

"I use KakaoTalk because Big Bang also use it and they are number one; I love them," says the 14-year-old.

KakaoTalk, Line and WeChat, a mobile messaging app developed by China's Tencent, are spending tens of millions of dollars on television advertising, online promotions and celebrity endorsements as they fight for the attention of tech-savvy southeast Asian teenagers.

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With a population of 600 million people, a burgeoning middle class and fast-rising smartphone sales, southeast Asia has become the front line in a battle for mobile phone users that is threatening the traditional dominance of mobile phone network operators, global internet companies such as Facebook and Google and now-struggling handset maker BlackBerry.

Like their western rivals, KakaoTalk, Line and WeChat allow users to send free messages through mobile internet connections but their playful, teen-friendly style has set them apart, driving them to the top of many app download charts.

"When you use Asian mobile chat apps such as KakaoTalk or Line, you have a certain sense of joy and fun communicating with your loved ones, whereas western apps focus more on pure functionality," says Le Hong Minh, chairman of VNG Corporation, Vietnam's leading internet company.

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KakaoTalk sparked the Asian mobile messaging revolution when it launched in 2010, but it has been overtaken by Line which this month crossed the 200 million user threshold, just two years after its inception – an accomplishment that took Facebook and Twitter more than five years.

"Facebook and Google definitely see these mobile messaging apps as a threat," says Mark Ranson, an analyst at technology research company Ovum.

BlackBerry, long dominant in Indonesia because of its free Messenger service, is losing ground because of growing competition from the Asian chat apps that can be downloaded on to any smartphone.

Sales of smartphones in southeast Asia have surged in the past few years because of rising incomes and the advent of cheaper, often Chinese-made phones that sell for as little as $50.

Southeast Asians bought 44 million smartphones in the 12 months to April, an increase of 60 percent on the previous year, according to GfK, a market research group.

"Southeast Asia is like Korea three or four years ago," says Lee Sir-goo, joint chief executive of KakaoTalk. "If you think about Korea, KakaoTalk really took off when these smartphone devices were first being sold [in large numbers]."

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Like Samsung, Hyundai and other South Korean companies, KakaoTalk has been benefiting from the widespread popularity of South Korean music and TV shows in Asia.

Along with WeChat and Line, which is based in Japan but owned by NHN, a South Korean internet company, it tailors its marketing strategies in each of the big emerging Asian markets including India, Indonesia, the Philippines and Vietnam.

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That is a markedly different approach than U.S.-based Google and Facebook, which tend to eschew traditional TV and billboard advertising and localisation in favor of building homogeneous global communication products such as email and instant messaging.

Mr Ranson says the rise of these Asian messaging apps shows the limits of the "one-size fits all" approach, even as Facebook hits back with its own enhanced messaging services.

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"If you're really serious about breaking into new markets, you need to customize and listen to local users," he says. "But for a massive company like Facebook, it's hard to listen to people in every country."

Like all internet start-ups, KakaoTalk, Line and WeChat face their own challenges – from finding ways to monetize their soaring user base to ensuring they do not fall out of fashion as quickly as they rose.

The three apps are free to download and the companies say they are focusing on attracting new users rather than making profits at this early stage.

They are also keen to expand beyond the region. Line's strongest markets are in Indonesia, Japan, Taiwan and Thailand but the app also has 10 million users in Spain.

And the revenues are starting to flow, through sales of "stickers" – stylized icons for user profiles – and add-ons for free games.

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Line reported revenue of Y5.82 billion ($58.9 million) in the first quarter of 2013 in its first public results, while KakaoTalk had its first profitable year last year, reporting revenue of $42 million and a net profit of $6.5 million.

Whichever companies survive and thrive, VNG's Mr Minh believes the rapid initial success of KakaoTalk, Line and WeChat presages the emergence of Asian internet companies that will challenge the dominance of the U.S. online pioneers.

"Western companies have tended to innovate earlier and faster due to their concentration of talent and an early market mass," says Mr Minh, who built VNG from scratch. "But nowadays, Asian companies also have large markets of internet and smartphone users and they will in many cases out-innovate western companies."