Despite the COVID Crisis, the Two Portal Giants Have Grown Even Larger

Naver Sales Increase by 16%... Operating Profit Expected to Decrease by 12%
Kakao Likely to Achieve Both Sales and Profitability Improvement
Usage Time of Naver Portal and KakaoTalk Increased Compared to Pre-COVID Period

[Asia Economy Reporter Jin-gyu Lee] Despite the challenges posed by the COVID-19 pandemic in the first quarter, Naver and Kakao successfully defended their earnings. Although their results fell short of initial market expectations, increased internet usage due to COVID-19 helped them avoid revenue losses. Both companies are expected to accelerate profit generation through new businesses such as the TechFin market this year.

◆ Naver Continues External Growth = According to industry sources on the 6th, Naver's first-quarter revenue is expected to reach 1.7 trillion KRW, a 16% increase from 1.5109 trillion KRW in the previous year, while operating profit is projected to be 180 billion KRW, a 12% decrease from 206.2 billion KRW in the same period last year. This external growth is attributed to strong performances in e-commerce sectors like Naver Shopping and content sectors such as webtoons. As concerns over COVID-19 spread reduced offline activities, online usage relatively increased. According to Rankey.com analysis, the average daily usage time per person on the Naver portal rose from 34 minutes 45 seconds in November last year (before the COVID-19 outbreak) to 43 minutes 32 seconds in the last week of February, then recorded 40 minutes 18 seconds in the last week of last month. However, profitability is expected to slightly deteriorate due to a decline in advertising revenue caused by the COVID-19 impact. KB Securities analyst Dong-ryun Lee stated, "Unlike during the H1N1 and MERS outbreaks, advertising budgets are shrinking rapidly," but added, "On the other hand, e-commerce and content sectors may benefit from the reduced offline activities." Naver plans to expand new business areas such as shopping and finance this year to generate profits. Naver CEO Sung-sook Han said during a recent conference call, "We aim to have more than 200 brand stores within Naver Shopping by the end of the year." Additionally, Naver Financial, established last November, plans to launch the 'Naver Account' in the second quarter and offer financial services including credit card recommendations, securities, and insurance.

◆ Kakao Likely to Catch Two Rabbits = Kakao is expected to achieve both external growth and profitability improvement. Industry estimates suggest Kakao's first-quarter revenue will increase by 20% from 706.3 billion KRW last year to 850 billion KRW, and operating profit will surge 140% from 27.7 billion KRW in the same period last year to 70 billion KRW. The key driver behind this performance improvement is the 'Tokboard,' KakaoTalk's advertising business model, as in the previous year. With growing concerns over COVID-19, more people have been checking in via KakaoTalk, increasing its usage. According to Rankey.com, the average daily usage time per person on KakaoTalk rose from 36 minutes 16 seconds in November last year (before the COVID-19 outbreak) to 45 minutes 40 seconds in the last week of February, then recorded 39 minutes 42 seconds in the last week of last month. Kakao aims to further improve results this year by enhancing the Tokboard service. Kakao stated, "We will provide a complete business experience connecting Tokboard, KakaoTalk Channels, Biz Messages, and Pay, steadily increasing TokBiz revenue growth." Alongside this, Kakao is accelerating its TechFin market strategy by offering services across banking, stocks, and insurance. KakaoPay Securities, launched on February 6, recently surpassed 500,000 securities account openings. KakaoPay will soon challenge the insurance sector as well. It plans to apply for preliminary approval from the Financial Services Commission soon to establish a digital non-life insurance company in partnership with Samsung Fire & Marine Insurance. A KakaoPay official said, "We are making every effort to expedite the preliminary approval process for the digital non-life insurance company."