Monday, October 29th, 2012 - OVUM
Melbourne, October 29, 2012 – The large Asian over-the-top (OTT) service players Tencent and NHN are seizing the social messaging market opportunity to expand beyond their home region, says global analyst firm Ovum. After gaining significant user bases in several Asian markets, both companies have plans to target other large markets, including the US.

In new reports*, the independent telecoms analyst firm examines the companies and strategies behind the rapidly growing social messaging applications Wechat and Line. In September 2012 Tencent’s Wechat (called Weixin in China) had a user base of over 200 million users, while NHN’s Line had over 60 million users.

Ovum consumer analyst Mark Ranson says: “Best known for its messaging, digital gaming, and social networking services, Tencent is taking a long-term view with Wechat, steadily building a large user base before focusing more heavily on monetization.

“Tencent knows from experience that building scale and loyalty among users is the key to long-term profitability in the value-added services (VAS) market – and with a market capitalization of approximately $61.5bn, it can certainly afford to wait. Tencent’s planned Wechat digital game center is likely to be the best opportunity to create significant revenues from the service.”

NHN generates most of its revenues in Korea and Japan; its Naver web search service and Hangame online game portal are its biggest revenue streams. More successful in the fixed-line Internet service market, NHN sees its Line messaging application as key to improving its mobile platform business and creating growth by entering new markets. It also sees digital games as central to its monetization strategy for Line.

Ranson adds: “Both companies have been built largely on revenues generated from fixed network online game services, and are naturally planning to expand on this success in the less mature mobile game market.

“Tencent and NHN’s current and future competitors should be aware that the companies’ expertise in online gaming and the monetization of online content, combined with their strong finances, will make both players credible threats in most markets they enter.”

---ENDS---

NOTES TO EDITORS

* On the Radar: Tencent

* On the Radar: NHN

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Keywords

social messaging market , over-the-top (OTT) service players, Tencent, NHN

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