External Growth and Profitability Improvement... Kakao Catches 'Two Rabbits' (Comprehensive)

'Tokboard' Key Contributor... Record High Sales Surpass 30 Trillion Won
Techfin Market Expected to Grow This Year in Banking, Stocks, and Insurance

[Asia Economy Reporter Jin-gyu Lee] Kakao has surpassed annual sales of 3 trillion won, achieving its highest-ever performance. With 44 million members, the national messenger KakaoTalk (KakaoTalk) has expanded its advertising performance, capturing both external growth and profitability improvement. From this year, diversification of its business portfolio is also expected as it provides financial services such as banking, stocks, and insurance.

◆Achieving Annual Sales of 3 Trillion Won = Kakao announced on the 13th that its sales last year reached 3.0898 trillion won, a 28% increase compared to the previous year. After merging with Daum, Kakao surpassed the 1 trillion won sales mark in 2016 and broke through the 3 trillion won barrier in just three years. Last year's operating profit was 206.6 billion won, up 183% from the previous year. Fourth-quarter sales increased by 29% year-on-year to 867.3 billion won, and operating profit grew 1750% to 79.4 billion won. A Kakao official explained, "The establishment of a KakaoTalk-centered business structure and the expansion of new business revenue models led to the highest-ever sales and profits."

◆'Tokboard' as the Top Contributor to Sales = The achievement of these results is largely credited to Tokboard, KakaoTalk's advertising business model. Yeo Min-soo, co-CEO of Kakao, stated at a conference call in November last year, "TokBiz sales, based on KakaoTalk, exceeded 600 billion won by the end of the year and are expected to reach 1 trillion won next year." Fourth-quarter TokBiz sales reached 221.6 billion won, a 73% increase year-on-year. PortalBiz sales grew 3% year-on-year to 134.2 billion won due to the seasonal advertising peak. Content segment sales increased 14% year-on-year to 423.3 billion won. The game content segment recorded 105.9 billion won, a 6% increase year-on-year, driven by the growth in game sales from the October release of "Dalbitjogaksa" (Moonlight Sculptor).

Kakao is aiming for further performance improvement this year through the advancement of the Tokboard service. Tokboard is expected to continue playing a key role in driving Kakao's performance improvement this year by expanding advertiser inflow. A Kakao official said, "This year, we plan to provide a complete business experience connecting Tokboard, KakaoTalk Channel, Biz Message, and Pay, solidifying the growth trend of TokBiz sales."

◆Becoming a Leading TechFin Company in Korea = Kakao is placing high hopes on the TechFin market, which provides services across all financial sectors including banking, stocks, and insurance. After becoming the largest shareholder of KakaoBank at the end of last year, it recently entered the securities business through the acquisition of a securities firm and will soon make a full-scale challenge in the insurance industry. KakaoPay is expected to apply for a preliminary license from the Financial Services Commission early next month to establish a digital non-life insurance company together with Samsung Fire & Marine Insurance.

On the 6th, KakaoPay completed the acquisition of Baro Investment & Securities as a subsidiary and changed its name to "KakaoPay Securities," accelerating its expansion into the securities business. KakaoPay and KakaoPay Securities plan to lead the "popularization of investment and asset management" by making asset management services, which were previously concentrated among a small number of wealthy individuals and financial experts, accessible to everyone through synergy. In the long term, based on KakaoPay's big data and artificial intelligence (AI) technology, they plan to expand investment services such as new investment solutions and advisory asset allocation services that allow users with little investment experience to easily earn profits.