Scale and domination of a market — LINE app in Taiwan

From my previous article, I tried to share my perspective about how LINE messenger found its PMF in Japan market. If you missed it, please read it here.

Now let’s move our focus to Taiwan market. How did it grow to its success?

This is indeed an interesting story to tell.

Let’s review the history information as background:

In Oct. 2011, LINE got traction in Japan. Later, almost immediately, Hong Kong users showed lots of interests and contributed dozens of thousands of downloads daily. Almost at the same time, the fever came to Taiwan. My former boss from Korea wrote me an email and asked me why Taiwanese loved LINE. I replied:

“What is LINE? Let me investigtat a bit first.”

The fact was, we were not in the group of early adopters but there were a bunch of people following Japan or Hong Kong popular culture seemlessly in the region. Hence, the spillover network effect naturally happened and the product hit the user sweet spot. The new revision of LINE was born to be a PMF in Taiwan and easily spreaded out.

I did not have a figure to understand how many early adopters were, but I did know that, by end of 2011, the download number for Taiwan market exceeded 1 million. What did it mean for this number? Was it good or bad? Let’s check the fact: In 2011, among all the apps in Taiwan, there were only around five apps whose download number exceeded that.

Considering LINE messenger didn’t spend money but acquired 1 million users within such a short time. It was easy to understand how high the viral coefficient for this product was. This number also laid a solid foundation for local network effect to be built. It also showed that it required no modification for the product in Taiwan since it already qualified the PMF definiton.

Let’s look at this from another angle to analyze the speed that you may reach 1 million downloads within approximately two months:

Initial users: 100

Download users double every 4 days

In ~50 days, there would be around 100*¹³~= 819,200

From the equation, what contributes to the amazing growth speed isn’t from the inital user count. Instead, it’s from the product power that makes user number doubles every 4 days.

Entrepreneurs should pay attention to how to grow the product power. When we improves the product features, we are satisfying the core users’ top needs. We spend our efforts to find the critical reason that user can grow exponentially.

As long as the growth secret is found, no matter how small your initial user base is, you will see astonishing result in a couple of months.

Step 2 : Scale with speed

I used LINE messenger success in Taiwan market as an example to show the importance of rapid iterations to find PMF.

By following the Startup Pyramid theory, the second step is even more important after PMF is identified. That is: fast scale, high-speed running to hyper growth.

All the major battles that we observed in internet industry usually surfaced during this stage and attracted lots of people to join watching the show.

Take LINE’s case as an example. Most users didn’t download nor use LINE in 2011. They probably started to use LINE after the TV commercial in Feb. 2012.

Let’s review two facts back in that time:

  1. Before this commercial, no other App company spent budget on TV commercials.
  2. If no TV commercial, LINE still grew very fast.

Please ask yourself:

If you were in charge, would you decide to spend several million dollars in TV commercials?

Spending money is easy while making decision is difficult. Therefore, it’s always great to follow a thinking framework:

You always need to consider competitions in every battle in the internet industry. the competition would make the business become red ocean quickly. To avoid it, you better run very fast. Run to where no one is there yet and build the moat. Then you will experience no competition.

At that time, WhatsApp and MSN was the most popular used messenger in Taiwan. However, MSN was declining while WhatsApp team didn’t pay attention to Taiwan market yet. By observing this, it was the opportunity that LINE should have grabbed.

Though LINE was indeed favored by Taiwanese while the growth speed was amazing, leveraging a good scaling tool to shorten the time could have been a great idea. As LINE ran faster, competition would be left behind. When competitiors wanted to challenge LINE at a later stage, it would be too late since the network effect was already there and the moat was unbreakable.

By thinking this way, would you use the scaling tool though it looked very expensive? This is the strategic reason why a large advertisment budget campaign was executed for LINE in Taiwan.

The result? 9 times yearly growth and that was the solid foundation keeping LINE’s leading position. WhatsApp was left behind and competition was avoided.

Conclusions

Back to the starting question of this article — how does a startup acquire initial users? Per my opinion, it’s not difficult at all for starters to find inital hundreds of users from core community or friends’ help. The efforts should be spent in rapid iterations to enhance the product user experience through observation and enhancements of the key features that users love. As for how to confirm that you’ve identified the key and reached PMF, attention to key metrics that measure and show exponential growth will do.

Once PMF is confirmed, starters should move to rapid growth stage. At the time, keep the growth metrics monitored any time and figure our improvement plan as long as numbers signal otherwise. Then, iterate the process.

If you have any other comments to discuss, please mail to [email protected]

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