Japan-based messaging platform Line reported a huge loss in Q3 as revenue in its core messaging business dipped and overseas user growth flattened.
The company reported a net loss of JPY9.6 billion ($85.4 million) compared with a profit of JPY1.64 billion in Q3 2017. The operating margin on its two core business segments dropped to 13.4 per cent from 27.1 per cent in Q3 2017.
Revenue rose 16.9 per cent year-on-year to JPY51.9 billion, but sales at its core content and communication business fell 2.1 per cent to JPY17.7 billion. The segment, which accounted for 34 per cent of total revenue, has been flat-to-falling for five consecutive quarters. Content sales were flat at JPY9.9 billion, while messaging revenue dipped 8 per cent to JPY6.9 billion.
Its advertising business grew 22.3 per cent to JPY26.9 billion, comprising 52 per cent of consolidated turnover.
Japan accounted for 71 per cent of total revenue.
Jefferies equity analyst Atul Goyal said in a research note that since Line needs to expand its suite of services, it believes costs will continue to rise faster than revenues. But, he noted if it can become a big platform in Taiwan and Thailand, it might be able to grow.
Marketing expenses jumped 128 per cent year-on-year to JPY5.78 billion, with the vast majority spent in Japan.
Goyal said the company has no revenue model for Line Pay, which is competing in a highly fragmented market with free services.
Line had 165 million monthly active users at end-September, down from 168 million at the same point in 2017. A loss of 13 million users in Indonesia year-on-year offset small gains in Japan (7 million), Thailand (2 million) and Taiwan (1 million).Subscribe to our daily newsletter Back