By Paul Mozur, Juro Osawa and Newley Purnell
Facebook Inc.'s$19 billion deal for WhatsApp in part is a move to bolster the U.S. company's position abroad.
But in Asia--which has the world's largest, and possibly most avid, social-media audience--Facebook still has its
work cut out for it.
That is because in Asia, even more than on Facebook's home turf, the big, growing social-media market is on mobile
phones. And if Facebook wants to be as dominant on smartphones in Asia as it has been on personal computers, WhatsApp
will need to lure users away from three popular apps in the region: Naver Corp.'s Line, Tencent Holdings Ltd.'sWeChat
and Kakao Corp.'s Kakao Talk.
Each, though little known in the U.S., has a stranglehold on a big Asian market: Line in Japan, WeChat in China and
Kakao in South Korea. Those apps, which offer social-networking and entertainment features on top of instant messaging,
represent trends in mobile Internet that started in Asia, a shift from trends starting in the U.S. and then spreading to
While WhatsApp is popular in some Asian markets--such as Hong Kong and Singapore--Line, WeChat and Kakao have
expanded in the region over the past two years, creating a tough environment.
"It's certainly true that competition is getting intense in many markets, " Line Chief Strategy Officer Jun Masuda
said Thursday. Facebook's latest deal "is proof of how valuable smartphone messaging has become in the age of mobile."
A Kakao spokeswoman said the deal is good for the industry and highlights how messaging services can be a good
steppingstone to offering a full-service mobile platform. Tencent declined to comment.
WhatsApp, with 450 million monthly active users, has a larger base world-wide than the three Asian apps, but they
aren't far behind. Line boasts 350 million registered users, while WeChat has more than 272 million monthly active
users. Kakao has 133 million registered users. The Asian apps also have demonstrated an ability to increase revenue by
offering games and other services that users pay for. WhatsApp charges users a flat $1 after a year of use.
The Asian apps have led some mobile-messaging trends. WeChat became popular in China thanks to a function that
allows the app to work like a two-way radio, with users leaving brief voice messages for each other. Last year, WhatsApp
made its voice message function more prominent.
In China, where Facebook is largely unavailable, WhatsApp isn't blocked. That offers a potential new channel for
Facebook to compete in the world's largest smartphone market. Though if WhatsApp adds social-media functions and gains
traction in China, it likely would either have to begin self-censoring, as Chinese social networks do, or run the risk
of being blocked in the country.
And given WeChat's dominance, analysts said it would be difficult for WhatsApp to make a dent in the market. With
its 2012 acquisition of Instagram, Facebook got a foothold in China, but the photo-sharing app remains relatively
unpopular in China because of domestic competition.
Zhai Qi, a 32-year old who works in the publishing industry in Beijing, said he had mostly switched to WeChat from
WhatsApp over the past two years. He now has hundreds of contacts on WeChat and only dozens on WhatsApp.
"WeChat has social-media functions and big group chats where we chat when we're bored," he said.
Tencent has said that WeChat has more than 100 million registered users outside China. Last year, the company spent
$200 million to promote WeChat in markets such as India, Spain and South Africa. Tencent had approached WhatsApp about
an acquisition, according to people familiar with the matter.
Of the three Asian applications, Japan's Line has been the most successful outside its home market. Overseas users,
mainly in Asia, now account for about 85% of Line users, according to the company. In Thailand, where the app has grown
popular, Line has been offering users temporary deals, known as flash sales, to buy consumer products. The app's
animated emoticons, which it calls stickers and sells to users, have also been a hit in countries across the region.
The Asian apps, which can be downloaded free, use mobile games to generate revenue through in-service purchases of
virtual goods, such as weapons for games. Line said fourth-quarter revenue more than quintupled to $120 million mainly
because of games.
Closely held Kakao, which doesn't disclose financial results, said its "Anipang for Kakao" color-matching game,
which users play through the messaging platform, generated $42 million in sales in 2012. Tencent doesn't disclose
In fast-growing regions such as Southeast Asia and India, there isn't a dominant messaging player yet. That could
provide an opportunity for Facebook, which already is popular in those regions. Though Facebook's ambitions for WhatsApp
aren't fully clear, the new partnership could rev up competition across emerging markets, executives and analysts said.
Concerns about increasing competition sent shares of Tencent down 3.1% in Hong Kong and Naver down 8.1% in Seoul on
Still, Forrester Research analyst Bryan Wang said WhatsApp's strategy of keeping the app simple and focused on
instant messaging could make it vulnerable. "If Facebook can't offer new services on WhatsApp, it will be hard for
Facebook to win this game in a short period of time," he said.
Jeong-yeon Han in Seoul, Anita Rachman in Jakarta, Indonesia, and Olivia Geng in Beijing contributed to this
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