Messaging app competition heats up In Southeast Asia

Asia Mobile Messagers

A woman opens Kakao Talk, a South Korean mobile messaging app with more than 60 million users, on her smartphone in Seoul. Pic: AP.

As Internet penetration has increased throughout Asia, more and more messaging apps have become available to this tech savvy population. As this trend continues, Southeast Asia becomes an important battleground for companies engaged in the business of creating messaging apps.

There is a lot of room for the growth of messaging apps in the region – Southeast Asia has more than 600 million people, many of who still do not have smartphones.

According to the research firm Nielson, only 50 percent of Thailand’s mobile phone users own a smartphone. Other countries’ smartphone numbers are much lower. Indonesia is at 23 percent and the Philippines is at 15 percent. In comparison, smartphone penetration in China has reached more than 71 percent.

An additional incentive that is stoking the online competition in this region is the fact that, for many people, smartphones represent the main way that users access the internet.

The majority of smartphone users in the region have more than one messaging app on their phones; many of these users have three or more.

One of the strongest competitors in Southeast Asia is Japan’s Line Corporation. With their Line Messenger App, the company has seen strong growth ever since its inception in 2011.  In fact, in 2013, Line became the number one non-gaming app in terms of revenue.  It is now spreading throughout Southeast Asia and competing with the likes of Kakao Talk, WeChat, and Viber.  Line has also become a serious competitor worldwide against big players such as Facebook, WhatsApp, Skype, and Instagram.

Additional important players in the region include Viber, which was recently bought for US$900 million by the Japanese e-commerce company Rakuten. Vietnam’s homegrown messaging app Zalo has a stronghold on that country’s market with more than 12 million users.

Many of the companies that are competing for dominance in the Southeast Asia market already have strong leads in certain countries throughout Asia. Line dominates Japan; WeChat is in the lead in China; Kakao Talk rules in South Korea; WeChat is the most popular app in Malaysia; Viber and Zalo are battling for the top position in Vietnam. In Indonesia, Blackberry Messenger remains very popular, despite the company’s financial woes in the West.

Show me the money

While the majority of these apps are free to download, many of them make sizable revenue off in-app purchases, such as stickers and virtual goods for games. Stickers are hugely popular and it is common for people to carry out whole conversations using the expressive images. An additional reason for the popularity of stickers is that they can make communication quicker for those who find it hard to type quickly in their own language – this is perhaps why Line’s selection of stickers for its Japanese customers is so extensive.

While apps like WhatsApp remain dominant globally, they have struggled somewhat to assert themselves in the Southeast Asia market. Companies like Line have found ways to make themselves stand out from the crowd through clever advertising campaigns and creating stickers tailored for the tastes of the local markets.

WeChat has sponsored television programs throughout the region, such as “Indonesian Idol,” and occasionally provides users with downloadable discounts for coffee and other products.

However, users of these messaging apps can be fickle. Switching costs are low – users do not have to spend time building up their social networks when they switch to a new app because the app simply pulls the information from the user’s address book, photos, etc. Therefore, all of the companies mentioned share the same worry that they will be replaced by a competitor or by some new startup that has yet to show its face in this ongoing battle for dominance in Southeast Asia.