Tech giant Kakao turns to digital display advertising for added revenue 

Kakao Corp. is looking to add display advertising to South Korea’s largest messaging app KakaoTalk, as well as the fintech apps developed by its affiliates KakaoBank Corp. and Kakao Pay Corp.

The tech giant has been displaying what it calls KakaoTalk Bizboard for a week on top of the app's Friends list to check user reactions. 

Display advertising means graphic advertising on internet websites, apps or social media platforms through banners or other advertising formats made of text, images, video and even audio.

KakaoTalk’s Bizboard is expected to serve as the company’s main source of revenue. 

The official launch of the advertising service is slated for late next month, and advertisers will be charged by the hour. 

Kakao has been including the advertisement banner under the Pay tab of its messaging platform since last Tuesday. 

An advertising area will also be allocated to the messaging app’s My News tab come Aug. 25. 

AD REVENUE

Adding display advertisements usually draw complaints from users, and sometimes even leads to people avoiding using the app or website altogether. 

But Kakao is in a pinch to secure revenue. 

On Aug. 4, Kakao reported its second-quarter net income plunged 68% year-on-year to 101.2 billion won ($76.2 million).

The operating profit ratio remained below 10% for four consecutive quarters, recording 9.4% in the second quarter of this year. 

The tech giant has been on a spending spree to expand its presence beyond the Korean Peninsula, pumping 426.2 billion won into labor costs and 150.3 billion won into marketing. The figures are 42% and 65% jumps, respectively, from the same quarter the year prior. 

Kakao Piccoma, one of Kakao ’s Japanese subsidiaries, is doing particularly well, with the app raking in the sector's highest revenue worldwide in the fourth quarter of last year. 

During its second quarter earnings call, Kakao CEO Namkoong Whon said, “In hard times, it is important to clearly define the company’s strengths and true colors.” 

Namkoong added, “The essence of Kakao’s business lies in advertising and commerce.” 

The reason why Kakao is looking to place the ads in the most popular sections of the messenger app is, naturally, to charge more. 

“The revamp of KakaoTalk’s advertising strategy could drastically increase the demand from advertisers,” an industry insider told The Korea Economic Daily. “I’d expect revenue to increase by more than 20%, offsetting the negative impact of the economic downturn.” 

GLOBAL TREND

The expansion of advertising space is an international trend. 

US mobile phone maker Apple Inc. is set to expand ads to new areas of the iPhone and iPad in search of its next revenue driver, Bloomberg News reported this week.

Starting with Apple Maps, the company could carry more ads in different in-house apps. 

Alphabet Inc.-owned Google LLC’s YouTube is also looking to carry advertisements on Shorts, a short-form video-sharing platform.

Streaming behemoth Netflix Inc., for its part, is planning to introduce a more affordable subscription service early next year, which requires subscribers to watch an advertisement in its entirety during a show or a movie. 

Write to Jeong-Soo Hwang at hjs@hankyung.com
Jee Abbey Lee edited this article.