Snapchat Could Learn From The Explosive Growth In This Messaging App's Sticker And Ad Revenue

Messaging app LINE has seen revenue grow explosively over the last year, providing a clue into how other mobile messaging apps, like Snapchat, might generate revenue.

LINE's revenue was $157 million in the third quarter, compared to just $10 million a year ago, a 1,500% increase.

LINE is much bigger than you might expect. It now has 300 million registered users globally. Its top five markets are Japan, Thailand, Taiwan, Indonesia and Spain. It's rumored to be heading for an IPO next year.

As the chart shows, the Japan-based messaging app drives revenue in two main ways. One, by selling digital goods: tokens purchased within its in-app games (LINE's equivalent to Facebook games), and stickers similar to emoticons.

Secondly, it's getting deeper into advertising, including paid brand accounts. The chart below shows how diversified LINE's revenue has become.

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Here's what its revenue breakdown looks like, and it's not just stickers:

• At $94.5 million, games are 60% of LINE's revenue. That share has grown 10 percentage points since the first quarter of 2013.
• Sticker revenue is now at $31.5 million, or 20% of revenue. Sticker revenue has shrank as a share of the total by 10 percentage points this year.
• The "other" category includes ads and the paid official accounts program, through which advertisers pay LINE for access to its platform. This revenue stream was on par with sticker revenue, at $32 million, and has held steady this year as a share of LINE's revenue.

LINE's results translate to $0.10 per registered user in sticker revenue and about $0.52 per registered user in overall revenue.

By comparison, Facebook brought in $0.81 per user in the third quarter in the Asia-Pacific region, where LINE also has the majority of its users.

What are the revenue streams other messaging apps should study? Probably LINE's ads, paid accounts and sticker sales. Snapchat, for example, already has a product called "Stories," through which users can send video and photo packages that don't disappear for 24 hours. Brands could pay for the privilege to have accounts and send stories.

Games, which can be played within LINE but have to be downloaded separately, are a tricky revenue stream to cultivate. It's not likely that many messaging apps will be able to build out their own gaming platforms.

We should also mention that the above revenue figures are for "gross sales," not the net amount once 30% of game sales get paid out to Google and Apple's app stores. So the game figure is inflated a bit. Still we thought it was more useful to include gross sales since that is the real value captured in the transactions, and if the company was ever able to do without outside app stores, it would keep all this revenue for itself.

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