Even Amid Platform Criticism... Naver and Kakao Earnings Bloom

While the government and ruling party are targeting platform companies, causing a harsh environment in the IT industry, Naver and Kakao are expected to record strong performances in the third quarter as well. Kakao faced criticism during this year's National Assembly audit for its sprawling business expansion. Although Kakao continues to achieve high growth rates in the third quarter thanks to its advertising business, it is facing deep concerns about its existing business models such as Kakao Mobility.

According to financial information analysis firm FnGuide on the 18th, Naver's estimated third-quarter revenue is projected at 1.784 trillion KRW, a 31% increase compared to the previous year. Operating profit is expected to grow by 26% to 367 billion KRW. Naver's growth in the search and display advertising sectors continues. Additionally, the commerce business segment, including online shopping, benefited from the COVID-19 boom, growing by about 40% compared to last year and driving strong performance. Content revenue is also gaining recognition as a new growth engine, with Naver Webtoon expanding its lineup.

Kakao's third-quarter revenue is estimated at 1.6 trillion KRW, and operating profit at 192.5 billion KRW, representing increases of 47.7% and 60.1% year-on-year, respectively. The advertising business played a key role as revenue from KakaoTalk's advertising service ‘Talk Biz’ grew. Fintech and mobility sectors also saw revenue growth, and content revenue is expected to grow significantly to about 807.9 billion KRW. Kakao Games’ massively multiplayer online role-playing game (MMORPG) ‘Odin: Valhalla Rising’ made a historic hit, contributing greatly. According to Mobile Index, ‘Odin’ has ranked first in combined revenue on Google Play and Apple App Store for three consecutive months.

However, as innovation in the domestic market is stifled by regulations from the government and ruling party, Naver and Kakao have had to turn their attention to global business. Naver, which accelerated its global business this year, is gradually showing results. Naver Z’s metaverse platform Zepeto has surpassed 200 million users worldwide. Zepeto’s global payment amount is also expected to have increased by about 99% compared to the previous year. Naver Webtoon’s global payment revenue continues to grow steadily. In January, Naver acquired the world’s largest web novel platform ‘Wattpad’ and is actively expanding into the North American market. This year, Naver is also expected to fully launch its Smart Store business through ‘Line,’ Japan’s national messenger.

On the other hand, Kakao has yet to make a significant impact overseas except for its webtoon business. Moreover, as Kakao’s existing business methods have faced public criticism, concerns about new growth models have deepened. Experts predict that Kakao will show similar patterns such as mergers and acquisitions (M&A) overseas. Professor Wi Jeong-hyun of Chung-Ang University’s Department of Business Administration said, “Kakao, which grew through M&A domestically, will apply the same approach to overseas business,” adding, “Domestically, it is highly likely to adopt an open market form that coexists with small and medium platforms.”