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Earnings

Kakao to strengthen subscription services after Q2 results

The tech company will also be building a golf course in Yongin city to address the growing demand for golf in Korea

By Aug 06, 2021 (Gmt+09:00)

Kakao’s co-CEO Yeo Min-soo stressed the importance of expanding subscription services. 
Kakao’s co-CEO Yeo Min-soo stressed the importance of expanding subscription services. 

Kakao Corp. this year has reported the highest second-quarter earnings in company history.

Its regulatory filing on Aug. 6 posted an operating profit of 162.6 billion won ($142.3 million) on revenue of 1.35 trillion won ($1.18 billion), respectively growing by 66% and 42% versus the same period last year.

The company said that it will sustain strong performance into the second half by expanding subscription services such as Kakao View launched on Aug. 3. Kakao View is a subscription service that curates news and information on current affairs, lifestyle trends and business to its subscribers.

Kakao View is the latest subscription service launched on Aug. 3 by Kakao.
Kakao View is the latest subscription service launched on Aug. 3 by Kakao.

“Kakao’s subscription ecosystem will further expand to include a wider range of products, services and multimedia content, with our messenger KakaoTalk playing a central role,” said Kakao’s co-CEO Yeo Min-soo during the quarterly earnings call on Aug. 6.

Kakao’s other subscription services include Subscription ON launched in June. Kakao Subscription ON offers regular deliveries of selected products as well as regular visits for lifestyle services such as room cleaning and laundry. The company also runs emoji subscription service on its popular KakaoTalk messenger.

At the same time, however, Kakao noted that it does not have plans to launch a shopping membership service similar to those of Naver Corp. and Coupang Corp., which allows the shoppers to save loyalty points every time they make purchases.

PERFORMANCE BY SEGMENT

Kakao highlighted that its TalkBiz segment, which takes up the largest portion of its revenues, mainly drove the growth in the last quarter. The TalkBiz segment incorporates advertising, emoji and e-commerce areas such as gifting on KakaoTalk. The segment generated sales of 390.5 billion won ($342 million), up 52% by the same period last year. Kakao added that its e-commerce business within the TalkBiz segment grew by 48% in transactions compared to the second quarter of 2020.

The business category of Other Platforms accounted for the second-largest portion of Kakao’s quarterly revenues. The Other Platforms segment incorporates its mobility and payment businesses spearheaded by Kakao Mobility Corp. and KakaoPay Corp. The segment generated revenue of 246.2 billion ($216 million) in the last quarter, up by 73% from the same period in 2020.

“Kakao Mobility is also pushing forward with its new business areas such as air travel, car rentals and micro-mobility,” said the co-CEO.

Kakao also said that its web novel and webtoon business recorded quarterly revenue above 180 billion won ($157 million) for the first time, mainly driven by Piccoma, its webtoon unit, which is the largest service in Japan boasting 4.2 million daily visitors.  

Kakao’s music business, spearheaded by Korea’s leading music streaming service Melon, also grew by 11% to 188.1 billion won ($164 million).

KAKAO INVESTS BIG IN GOLF
 
Meanwhile, Kakao is building a golf course in Yongin city, just outside Seoul, on a land sized 1.1 million square meters.

According to the Yongin city government and the golf industry on Aug. 6, Kakao will spend 150 billion won ($131 million) to build the country club through Gaseung Development Ltd., which is 55% owned by its screen golf unit Kakao VX Corp. Kakao VX has about a 30% share of the country’s screen golf market.

Industry officials say that the recent golf boom is driving Kakao to expand its business scope beyond digital golf. Domestic research institutes estimate the country’s golf population to be 5 million, whereas the screen golf market leader Golfzon Co. says the figure has already surpassed 10 million.

Other sources added that Kakao will also launch golf wear products through its fashion unit KakaoStyle, previously known as Zigzag prior to its acquisition.

Write to Joo-wan Kim and Dong-hui Park at kjwan@hankyung.com

Daniel Cho edited this article.

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