February 28, 2017 1:00 pm JST

Diversification plus domestic focus equal success for Kakao

South Korean IT company must rethink its overseas strategy to maintain momentum

KOICHI KATO, Nikkei staff writer

SEOUL -- South Korean information technology company Kakao has risen to the forefront of the domestic market through diversification.

The company, created in 2014 through a merger between Daum Communications, operator of the Daum search engine, and Kakao, which developed the Kakao Talk chat app, has since rolled out a wide range of services. In the year ended December, its consolidated sales topped 1 trillion won ($882 million) for the first time.

The company has made itself a big part of South Korea's IT landscape by launching services faster than its rivals. On Feb. 18, it created Kakao TV by combining the video services of its two predecessor companies. The new service is available on both personal computers and Kakao Talk, which has 42 million monthly active users in the country.

Kakao has used the brand recognition of Kakao Talk to launch new services, including a ride-hailing app and a beauty salon information service that allows users to search for shops and make reservations.

While rival Naver does much of its business elsewhere in Asia, including Japan, Kakao's strategy up to now has been to concentrate on South Korea.

Last year, Kakao bought Loen Entertainment, operator of the Melon music streaming service, a move that helped the company improve its previously advertising-dependent revenue structure. As a result, nearly half Kakao's revenue comes from sales of content.

A key challenge for Kakao is expanding its overseas business. The company once had 10 million monthly active users abroad but it now has just 6.87 million, falling behind rivals such as WhatsApp of the U.S. Kakao will need to revamp its strategy to regain lost ground, particularly in Southeast Asia.

Asia300

Kakao Corp.

South Korea

Market(Ticker): KRX(035720)
Sector:
Industry:
Technology Services
Internet Software/Services
Market cap(USD): 6,798.30M
Shares: 67.78M
Asia300

NAVER Corp.

South Korea

Market(Ticker): KRX(035420)
Sector:
Industry:
Technology Services
Internet Software/Services
Market cap(USD): 22,723.92M
Shares: 32.96M

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