IT Giants Expanding Advertising Business... Kakao and Naver Plan to Expand Search Advertising

[Asia Economy Reporter Buaeri] Kakao and Naver are pushing to expand their search advertising businesses. Amid the spotlight on online shopping due to the impact of the novel coronavirus disease (COVID-19), competition to dominate advertising between the two major domestic portals is expected to intensify.

According to the IT industry on the 14th, Kakao is planning to introduce brand search ads where, when searching for specific keywords in KakaoTalk's Friends, Chat, Shop, and More tabs, the advertiser's channel is displayed at the top.

This ad concept applies the search ads operated on the portal site 'Daum' to KakaoTalk. For example, when a specific keyword is entered in the search bar, the advertiser's brand chatbot or shortcut button is displayed, enhancing accessibility.

A Kakao official said, "It is true that we are preparing advertisements," adding, "The launch timing and specific specifications of related products are still fluid."

KakaoTalk already runs display ads in the Friends and More tabs. Additionally, it launched Talk Board at the top of the Chat tab last year, accelerating its advertising business. Thanks to this expansion, in the first quarter of this year, it recorded sales of 868.4 billion KRW and operating profit of 88.2 billion KRW, achieving the highest quarterly sales and operating profit ever. Sales increased by 23% year-on-year, and operating profit rose by 219%.

In particular, 'Talk Biz,' which collectively refers to businesses such as advertising and shopping, recorded sales of 224.7 billion KRW, up 77% year-on-year, due to the expansion of new advertisers and steady growth in commerce.

Naver also plans to conduct a one-week test starting on the 15th to increase the number of shopping search ads from the current 4-8 to 6-12. Naver's shopping search ads display the advertiser's products ahead of general product search results when users search for product names. Naver also posted sales of 749.8 billion KRW in the business platform sector, which includes shopping search ads, up 12% year-on-year in the first quarter of this year.

Naver plans to test the expansion of shopping search ads for one week until the 22nd and decide whether to officially apply it. Considerations include whether the expansion of ads will reduce search reliability, cause user inconvenience, or decrease advertising effectiveness.