Kakao is putting out a new O2O (Online to Offline) service every quarter as a new driving force and is going to recover its game platform business’s slump with KakaoTalk emoticon character games and mobile social board games.

KakaoTalk made an announcement at its 3rd quarter performance conference call on the 12th that it is promoting O2O business as a medium and long-term driving force by expanding its business.

As Kakao expands its current O2O services, it is going to put out one or two new O2O services per quarter. Kakao is going to increase numbers of locations and cars for its luxury taxi call service ‘Kakao Taxi Black’, which is a payment model of Kakao Taxi, by end of this year. “Due to early positive results of Kakao Taxi Black that started with 100 cars, we are preparing for serious marketing. We are considering about increasing number of cars and planning to expand its service, which is limited to just Seoul, to all of South Korea.” said CFO Choi SaeHoon.

Kakao is continuously releasing new O2O services and is also feeling out about entering delivery service, which is the most competitive area in O2O business. Team Leader Choi Yong Seok of IR and Finance said that it is examining shipping, home service, and delivery areas.

Kakao is making new O2O business as open-type just like game platform business. It is definitely developing its own services and considering all of methods about working together with outside startup companies.

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It is going to prepare breakthroughs for its game platform business that is currently struggling by using IPs. Kakao earned $44.3 million (51.4 billion KRW) in sales from game platform business in 3rd quarter, and its sales continued to decrease after earning $60.3 million (69.9 billion KRW) and $46.6 million (54 billion KRW) in 1st quarter and 2nd quarter respectively. “Overall sales in game platform decreased due to reduction of Kakao Games’ sales due to deepened competition in mobile games and exclusion of Onnet, which was sold in 3rd quarter, from being part of its sales.

Because Kakao predicts that it will take some time to see effects of O2O business, importance of game platforms is very high. Kakao is releasing its 2nd game using Kakao Friends’ IP, which has higher profitability than normal games, in 4th quarter. Generally 21% of sales of games that are released from Kakao platforms usually go back to Kakao, and cost of using Kakao Friends game’s IP is actually added here.

Kakao is also strengthening its mobile social board games and it is releasing Engine, Sunday Toz, Joy Max, Party Games, and other mobile social board games in 4th quarter.

After recognizing that problems about being careless in protecting children and teens from internet trolls are getting bigger, CFO Choi emphasized that Kakao is going to do its best to grow gaming markets and to make healthy societies by following regulations and guidelines. On the 27th of October, Kakao started preliminary reservations of mobile social board games such as ‘AnipangGo-Stop’, ‘Friends Go-Stop’, and others.

Kakao predicted that profits of commerce and advertisements will increase due to an effect of peak season in 4th quarter. “Due to a peak season in 4th quarter, usage rates of ‘Giving Gift’ and ‘Kakao Style’ will increase. Quarterly growth rate of commerce business in 4th quarter will surpass 30%, and Kakao Style that is based on sales of advertisements will also benefit from a peak season.” said CFO Choi.

Kakao made $198 million (229.6 billion KRW) and $14 million (16.2 billion KRW) in sales and operating profit in 3rd quarter respectively. Although its sales increased 3.5% compared to 3rd quarter of 2014, its operating profit decreased 47.4% due to slow season for advertisement business, which has the biggest scale of sales, and reduction of game platforms’ sales.

However its operating profit is considered as satisfactory in a sense that industries predicted that its operating profit will fall short of $8.62 million (10 billion KRW) in 3rd quarter. “As Kakao made $13.8 million (16 billion KRW) in operating profit in 3rd quarter, it exceeded market’s expected value.” said a researcher Jung Yong Jae of Mirae Asset Securities Co. “Because 4th quarter is a peak season for advertisements and performance of popular games such as Friends Pop, 100shots100hits, and others will be applied wholly, Kakao will do much better in 4th quarter than 3rd quarter.”

Staff Reporter Oh, Daeseok | ods@etnews.com

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<▲In past 4 quarters, Kakao made $219 million (254 billion KRW (4th quarter of 2014)), $202 million (234.4 billion KRW (1st quarter of 2015)), $195 million (226.4 billion KRW (2nd quarter of 2015)), and $198 million (229.6 billion KRW (3rd quarter of 2015)) in sales. ▲In past 4 quarters, Kakao made $143 million (165.3 billion KRW (4th quarter of 2014)), $122 million (141.7 billion KRW (1st quarter of 2015)), $130 million (150.7 billion KRW (2nd quarter of 2015)), and $123 million (142.9 billion KRW (3rd quarter of 2015)) in sales from advertisement. ▲In past 4 quarters, Kakao made $58.9 million (68.2 billion KRW (4th quarter of 2014)), $60.3 million (69.9 billion KRW (1st quarter of 2015)), $46.6 million (54 billion KRW (2nd quarter of 2015)), and $44.4 million (51.4 billion KRW (3rd quarter of 2015)) in sales from games. ▲In past 4 quarters, Kakao made $12.3 million (14.2 billion KRW (4th quarter of 2014)), $13.4 million (15.5 billion KRW (1st quarter of 2015)), $11.7 million (13.6 billion KRW (2nd quarter of 2015)), and $13.2 million (15.3 billion KRW (3rd quarter of 2015)) in sales from commerce. ▲In past 4 quarters, Kakao made $5.27 million (6.1 billion KRW (4th quarter of 2014)), $6.13 million (7.1 billion KRW (1st quarter of 2015)), $6.91 million (8 billion KRW (2nd quarter of 2015)), and $17.2 million (19.9 billion KRW (3rd quarter of 2015)) in sales from other businesses. ▲In past 4 quarters, Kakao made $56.5 million (65.4 billion KRW (4th quarter of 2014)), $34.8 million (40.3 billion KRW (1st quarter of 2015)), $9.84 million (11.4 billion KRW (2nd quarter of 2015)), and $14 million (16.2 billion KRW (3rd quarter of 2015)) in operating profit. >