Kakao becomes Korea’s top platform firm, besting archrival Naver

Kakao Corp., best known for South Korea’s top mobile messenger app KakaoTalk, has become the country’s top platform company in terms of revenue, besting its archrival Naver Corp. for the first time in nearly two decades.

Kakao is a household name in Korea, with its operations spanning various sectors, including digital content, mobility, games and fintech, but long walked in the shadow of Naver as the companies duel in the largely overlapping businesses.

Since NHN Corp., Naver’s predecessor, assumed the top post in Korea’s internet service market amid the dot.com boom in 2003, Naver has been the industry leader with the highest sales revenue among local peers.

But now, with mobile games widely enjoyed across all age groups alongside the growing popularity of webtoons and web novels worldwide, Kakao has become the industry's highest-grossing company on its home turf.

Kakao said on Thursday it posted 1.74 trillion won ($1.47 billion) in sales for the three months to September on a consolidated basis, up 58% from the year-earlier period, and beating Naver’s revenue of 1.72 trillion won.

Kakao’s third-quarter net profit rose nearly sixfold to 866 billion won, while its operating profit increased 40% on year to 168 billion won.

“On the back of our strong results, we aim to further expand our content ecosystem globally,” said Kakao co-CEO Yeo Min-soo during its earnings conference call.

ODIN, KEY CONTRIBUTOR FOR REVENUE GROWTH

Kakao attributed its strong quarterly performance to its game business, which saw its sales rise more than threefold to 463.1 billion won, posting a faster growth rate compared to its mainstay online advertisement, e-commerce and other business divisions.

Analysts said Korea’s top mobile game Odin: Valhalla Rising, launched in late June by Kakao Games Corp., was the key factor behind its handsome revenue growth.

Kakao’s other businesses also performed well in the third quarter.

Revenue from Talk Biz, a business platform on its messaging app KakaoTalk, rose 38% on-year to 404.9 billion won.

Its story business revenue increased 47% to 218.7 billion won, boosted by its acquisition in the second quarter of US mobile fiction startup Radish Fiction Inc. and the third-largest US digital comics platform Tapas Media Inc.

TOUGHER REGULATORY MOVES FOR SHARED GROWTH

Kakao’s decent third-quarter results also come as Korea’s big platform companies, including Naver and Coupang Corp., face tougher regulatory moves against their sprawling business expansions.

In September, the country’s top financial regulators and the antitrust body said they are looking into the platform operators’ business practices for any wrongdoing, vowing to create a level playing field for smaller rivals.

Under siege, Kakao has announced a series of measures aimed at co-prosperity with small business operators. The measures included Kakao's withdrawal from community businesses such as flower and snack delivery services that compete with mom-and-pop stores.

Analysts say Kakao’s stellar performance driven by its game business may not continue into the fourth quarter and next year, given the relatively short lifespan of mobile games.

PICCOMA TO ENTER FRANCE AS KAKAO ALSO EYES NFTs

“We expect the positive impact of the launch of Odin on our third-quarter earnings to stabilize going forward, which could pull down our overall content revenue in the fourth quarter,” said Kakao Chief Investment Officer Bae Jae-hyun.

To support its game revenue growth, the company said it will actively pursue overseas expansion.

Kakao Japan, which runs webtoon platform Piccoma, Japan’s largest webcomic service boasting more than 4 million daily viewers, said on Thursday it is changing its company name to Kakao Piccoma, and plans to enter the European webtoon market starting with France by year-end.

Bae, Kakao’s chief investment officer, said the company also plans to strengthen its digital business, expanding projects related to non-fungible tokens (NFTs), which are drawing keen interest across industries.

NFTs are unique digital assets that cannot be reproduced, altered or counterfeited as they are deployed on a decentralized blockchain.

Write to Min-Ki Koo and Joo-Wan Kim at kook@hankyung.com
In-Soo Nam edited this article.