Operating Profit 71.1 Billion KRW... 55% Decrease YoY
KakaoTalk Revamp, 'Open Chat' in Third Tab
Targeting 40 Million Users for Friends Tab
Kakao's operating profit for the first quarter of 2023 decreased to half of last year's level. The weakness of the portal 'Daum' and the slowdown in the advertising market had an impact. Kakao plans to rebound its performance through a revamp of KakaoTalk.
Operating Profit Down 55% Year-on-Year
Kakao announced on the 4th that its sales for the first quarter of this year reached 1.7403 trillion KRW, a 5% increase compared to the same period last year. Operating profit was 71.1 billion KRW, down 55% year-on-year, with an operating margin of 4.1%.
Looking at sales by business segment, Talk Biz sales in the platform division decreased by 1% compared to the previous quarter due to advertisers' conservative marketing execution amid delayed economic recovery and seasonal off-season effects. However, supported by growth in transaction-type sales, it recorded 515.6 billion KRW, a 12% increase year-on-year, continuing its growth trend.
Portal Biz sales, which include the portal Daum and KakaoStory businesses, decreased by 15% compared to the previous quarter and 27% year-on-year to 83.6 billion KRW. Platform Other segment sales recorded 365.6 billion KRW, up 5% quarter-on-quarter and 18% year-on-year, driven by steady growth in Kakao Mobility's taxi, designated driver, and parking businesses, as well as increased sales from Kakao Pay's payment and financial services.
The content segment recorded sales of 775.6 billion KRW, similar to last year. Story sales reached 228.6 billion KRW, a 3% increase quarter-on-quarter, achieving the highest quarterly sales ever in the Japanese market and continuing growth in transaction volume. However, due to operational restructuring in North America and domestic markets and a focus on profitability-centered efficient marketing, sales decreased by 5% year-on-year.
Music sales increased by 13% year-on-year to 232 billion KRW, while media sales decreased by 10% year-on-year to 67.7 billion KRW. In the first quarter, Kakao acquired a 40% stake in SM Entertainment, becoming the largest shareholder, and plans to build a global business based on SM Entertainment's global business capabilities.
Game sales were 247.3 billion KRW, up 7% quarter-on-quarter and similar to the same period last year. The effect of new game releases in the first quarter is expected to be reflected in second-quarter sales this year.
Operating expenses for the first quarter increased by 12% year-on-year to 1.6692 trillion KRW. Outsourced infrastructure costs rose 18% year-on-year due to active investments in data center diversification. Depreciation increased by 15% year-on-year due to increased CAPEX (capital expenditure) investments related to data center construction.
Kakao plans to continue investing in infrastructure to ensure stable and continuous service provision while promoting efficiency in operating expenses. It will also expand investments in future growth engines such as artificial intelligence and healthcare. In particular, to secure leadership in the artificial intelligence (AI) field, Kakao will invest in building AI foundation models.
KakaoTalk Revamp... Key to Performance Rebound
Kakao is aiming for a performance rebound through a revamp of KakaoTalk.
Hong Eun-taek, CEO of Kakao, said at the earnings conference call, "The various upgrades and revamps of KakaoTalk's main tabs are intended to segment KakaoTalk's essence of communication and provide services that fit their purpose and essence," adding, "Satisfaction with the platform is expected to improve through various revamps by the second half of the year."
This month, KakaoTalk's third tab will change from the 'View' tab to the 'Open Chat' tab. The goal is to secure more than twice the daily active users compared to the existing View tab by the end of the year.
CEO Hong explained, "By placing Open Chat, which was previously difficult to discover, as the third tab, users will be able to easily find and join rooms that match their interests."
Revamps of the 'Friends' tab will also continue. He said, "With sequential revamps continuing until the second half, the Friends tab's daily active users are expected to expand from 22 million to 40 million."
He added, "Currently, friends with birthdays appear in the Friends tab, but friends with anniversaries will also be included. Events for gifting on occasions such as graduation, school entrance, and employment will increase, leading to sales growth. The Friends tab will become a contact point where various users meet."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
