Kakao's Record-Breaking Q3 Performance Surpasses Naver (Comprehensive)

[Asia Economy Reporters Kang Nahum, Boo Aeri] Despite comprehensive regulatory pressures from the political sphere due to controversies over infringing on local small businesses, Kakao achieved its highest-ever performance in the third quarter. Notably, its revenue surpassed Naver for the first time. The platform business based on the 'national messenger' KakaoTalk showed steady growth, while the content sectors such as games and webtoons also drove strong results.

◆ Kakao Soars on Platform and Content Wings = Kakao announced on the 4th that its third-quarter revenue reached KRW 1.7408 trillion, and operating profit was KRW 168.2 billion. This represents a 58% and 40% increase respectively compared to the same period last year. Both revenue and operating profit are record highs on a quarterly basis. The operating profit margin was recorded at 9.7%.

Platform segment revenue increased by 35% year-on-year to KRW 778.7 billion. Talk Biz revenue grew 38% to KRW 404.9 billion. Stable growth in advertising revenues such as Bizboard and KakaoTalk Channel, along with transaction-type revenues from Talk Store and Gift services, drove this growth.

Growth in the mobility segment was also notable. On the conference call, Kakao co-CEO Yeo Min-soo stated that the number of users for Kakao Mobility expanded to about 30 million in the third quarter. He said, "Mobility revenue grew only 3% due to social distancing impacts," but added, "User convenience is steadily improving." He further noted, "Operational efficiency has continuously improved, and KakaoT Blue vehicles have increased to 30,000."

Portal Biz revenue decreased by 2% compared to the same period last year, totaling KRW 119.2 billion. Other platform segment revenues, driven by KakaoPay’s expansion in payment and financial services, increased 54% to KRW 254.7 billion. Content segment revenue rose 84% to KRW 962.1 billion. Story revenue grew 47% to KRW 218.7 billion, supported by steady growth in platform and intellectual property (IP) distribution transaction volumes, as well as the inclusion of Tapas and Radish.

Regarding content segment revenue, CEO Yeo explained, "In Thailand, Kakao Webtoon has grown to a level where it stands shoulder to shoulder with the market’s number one operator by leveraging original IP, establishing a duopoly system. In North America, we completed the acquisition of Tapas and Radish in July and are currently in the phase of learning local customer preferences by offering original webtoons and web novels. User growth is being observed, and we expect significant growth starting next year."

Music revenue increased 8% year-on-year to KRW 197.1 billion, and media revenue doubled with a 102% increase to KRW 83.1 billion. Game revenue surged 208% to KRW 463.1 billion, driven by the record-breaking success of the mobile game ‘Odin: Valhalla Rising,’ which ranked first in both major markets.

◆ Kakao Undertakes Structural Reform = Kakao reaffirmed its commitment to coexistence with local small businesses. Regarding controversies over infringing on local small businesses, CEO Yeo stated, "We will fulfill our social responsibilities." She added, "Recent controversies surrounding Kakao have served as an opportunity for Kakao and the Kakao community to return to their original intentions," emphasizing, "Kakao promises to create a ‘better world moving forward together’ with our partners."

Industry insiders point to ‘organizational renewal’ and ‘global expansion’ as the keys to Kakao’s structural reform. It is known that next month, CEOs of major affiliates will gather to publicly share their management philosophies. Each affiliate plans to transparently disclose these operational goals to the public.

There are also signs of management system restructuring across the headquarters and affiliates. On the 1st of last month, Kakao appointed 10 non-registered executives. This is the first introduction of executive ranks since the company’s founding and is interpreted as Kakao’s intention to overcome the current crisis by changing its governance and business operation methods. Among affiliates, Kakao Games is also undergoing management restructuring by adding a global business direction to its current co-CEO system to enhance global competitiveness.

Global expansion is also accelerating. Kakao Japan, which has achieved remarkable results in the Japanese manga platform market, changed its name to ‘Kakao Piccoma’ and is entering the European market starting with France. The plan is to establish itself as a comprehensive digital manga platform by offering Kakao Entertainment’s original IP, digital manga content secured in the Japanese market, and digitized local French comics, leveraging its proven competitiveness in Japan.

This content was produced with the assistance of AI translation services.