[Click eStock] "Kakao, Advertising Growth Strategy Detailed... Both Demand and Supply Will Expand"

[Asia Economy Reporter Myunghwan Lee] Hana Securities announced on the 2nd that it maintains a buy rating and a target price of 135,000 KRW for Kakao. The firm also expressed a forecast of growth as Kakao's advertising growth strategy becomes more concrete.

Hana Securities pointed out that Kakao's advertising products are diversifying their billing structure from performance-based ads to guaranteed ads. Guaranteed ads are products that guarantee display time for a certain period, which is expected to generate stable advertising revenue. Unlike performance-based ads, where prices are determined through bidding for each exposure, guaranteed ads use a cost-per-time (CPT) model with fixed prices per ad space. As part of the KakaoTalk app revamp, a Biz Board ad space was recently added to the top of the profile tab, which also introduced guaranteed ad billing. Hana Securities expects participation from advertisers with brand advertising demand, as ads can be displayed for extended periods.

They also noted that the activation of KakaoTalk's Open Chat is expected to diversify advertisers because search ads will become possible. Unlike display ads, which are mainly targeted at large advertisers, search ads have a high proportion of small and medium-sized enterprises (SMEs). Currently, Kakao only offers display ad products, which causes significant revenue fluctuations due to budget changes from some advertisers.

Hana Securities forecasted that if Open Chat, which currently has about 9 million daily active users (DAU), becomes fully active, Open Chat room hosts may have incentives to pay for ads to rank higher in search results. This is because users tend to find Open Chat rooms through keyword searches.

Yoon Yeji, a researcher at Hana Securities, stated, "Kakao's advertising revenue per monthly active user (MAU) is about one-quarter of Naver's and is also lower compared to Meta's average revenue per advertiser in the Asia region," adding, "We expect simultaneous growth in demand and supply through ad space expansion and diversification of ad products this year and next year."

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