Company Analysis on Kakao Corp.

7 OCTOBER 2019

Meet Kakao Corp: Korea’s mobile giant that began in 2010 with KakaoTalk, Korea’s biggest instant messaging app, and now offers a tremendous variety of services.

With CEO Beom-Su Kim, Kakao Corp is also owned by multiple institutions (e.g., National Pension Service of Korea). Broadly, Kakao’s services (Appendix A) include communication, contents, commerce, games, mobility, Fintech, a search portal, and social impact. The Content unit brought a big shift in revenue from Platform in 2016, now making up over half of the total revenue through emoticons, webtoons, and games (Appendix B). Kakao’s business services, which have been steadily on the rise, include the Biz Board, keywords ads, Biz Message (automated 1:1 chats with a business’s customers), Store, Style, and Food -- all accessible via KakaoTalk -- alongside a new blockchain platform. The most popular Kakao apps include Kakao Pay, Kakao T (equivalents to Uber, CitiBike, and Waze), and Kakao Bank (Kakao, 2019a).

Kakao’s greatest accomplishment is undoubtedly its complete integration into the Korean community, with over 44.42 million regular users as of August 2019 in a population of 51.47 million.

Other users span across over 230 countries using 16 languages (Kakao, 2019b), and while 99.2% of Korean internet users used KakaoTalk in 2016 (Ramirez, 2017), even feature phone users now have access through a KakaoTalk button on the device. When KakaoTalk launched, it spread exponentially because it was the first free, unlimited alternative to regular SMS messaging, just as smartphones started to replace feature phones in Korea (Chadha, 2017). In 2018, Kakao Corp’s total revenue exceeded 2 billion USD and reached a market cap of nearly 1 billion USD last month (Factiva, 2019). Appendix C shows trends of Kakao’s financial performance, business segment, and geographic segment.

Kakao Corp’s biggest competitor is Naver Corp and its instant messaging app, Naver LINE. The Naver search engine that lends the nickname “Google of Korea” surpasses the Daum Kakao search engine, while Naver Map and Kakao Map fair similarly among users, and the Line Store tails slightly behind the Kakao Friends Store.

The biggest competition is between Line and KakaoTalk: though KakaoTalk is unequivocally more popular than Line in Korea, Line had 194 million users globally at the beginning of 2019, compared to 50 million Kakao users total (Iqbal, 2019). With various Kakao services seen individually, however, each has its own competitor. For instance, though KakaoTaxi has taken over phone-booking services and is now employed by nearly all taxi drivers in Seoul, T-Map Taxi is on the rise. Kakao Pay competes with Toss, food-ordering via KakaoTalk with UberEats, and Kakao T Bike with Ddareungi. Korea continues to become inundated with yellow and nearly every customer service branched labeled “Kakao.”

However, Kakao has been facing some major issues shared by many US media giants. In late 2018, for instance, thousands of Seoul’s taxi drivers called a nationwide strike against Kakao’s new carpooling service until Kakao made a compromise. More recently, Kakao was criticized for its overt commercialization of KakaoTalk with Biz Board’s ad placements at the top of the default chat tab, and currently, Kakao is facing privacy issues regarding its smart speaker Kakao Mini. Both Naver and Kakao admitted to collecting users’ voice commands and converting them into written files, and though Kakao explained only 0.2% of the recordings were collected and all data were anonymized, public concerns did not cease. Naver stated that it would become “the first Korean company to adopt a privacy protection tool like Amazon” (Yeo, 2019) but did not release a timeline, while Kakao has yet to do either. Google, Amazon, and Apple all faced the same issue in the past, demonstrating the increasing prevalence of privacy concerns over AI interfaces.

For Kakao to maintain a positive image and speak to its social impact value, it must respect customer privacy and avoid monopolization over smaller companies.

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APPENDICES

Appendix A: Kakao Services shown on the company website (Kakao, 2019a).

Appendix B: Q2 2019 Kakao Earnings Presentation (Kakao, 2019b).

Appendix C: Performance/Segment Information on Kakao Corp (Factiva, 2019)