Kakao seeks to monetize messenger platform

Advertising shrinks on decreased PC traffic

By Yoon Sung-won

Kakao CEO Rim Ji-hoon pledged to introduce business models for its mobile instant messenger platform Kakao Talk, Thursday.

“It is difficult to say that we have really adopted business models for Kakao Talk so far,” Rim said during a conference call, Thursday. “Whereas Kakao Talk has focused on communication between users, it will connect users to content and to our business partners and we will introduce diverse business models to facilitate that. Kakao Talk’s business models have just started.”

Rim’s remarks came as a promise to company investors. The CEO, who will enter his second year in the position next month, has been urged to generate results.

Tapping into the over 41 million active users of Kakao Talk, Kakao is aggressively expediting to diversify its service portfolio in the online-to-offline (O2O) sector by rolling out the designated driver service Kakao Driver and the hairdresser reservation service Kakao Hair Shop. It also plans to launch Kakao Parking and Kakao Home Clean within the year.

However, the company’s profitability remains in question as concerns are that it will be difficult for the company to make tangible results out of the new O2O service in the short term.

“I am well aware of how LINE and WeChat are evolving, and we’re learning from them,” Rim said. “It means a lot to connect users to the world. I will put that in practice step by step.”

In its regulatory filing on Thursday, Kakao said it posted 26.6 billion won ($24.15 million) in operating profit for the second quarter, up 132.8 percent from last year’s 11.4 billion won.

Sales reached 376.5 billion won, up 66.2 percent year-on-year, whereas the net profit stood at 13.2 billion won, plunging 38 percent in the same period. In the second quarter, Kakao recorded 226.4 billion won in sales and 21.3 billion won in net profit.

The quarterly earnings reflected the performance of Loen Entertainment, which Kakao acquired in March, for the first time.

Kakao attributed its content business including music streaming and gaming services to its growth in sales and operating profit.

The company generated 190 billion won from its content platform sector, up 215.2 percent. Over 47 percent of it was from Loen Entertainment’s music streaming service MelOn, it said.

On the back of the popularity of its computer online game “Black Desert” in North America, its game content sales rose 45 percent year-on-year.

On the other hand, its advertising platform sales remained at 136.2 billion won, decreasing 12.1 percent from a year ago. The company said a slowdown in computer online traffic weighed negatively on this sector.

On Thursday, Kakao closed at 91,300 won on the Seoul bourse, down 1.51 percent from the previous day.