Nakao Shows Mixed Reactions Despite Record Q2 Sales... Full-Scale AI Battle in Second Half

Naver Achieves Record Operating Profit with Balanced Growth Across Businesses
Kakao's Revenue and Operating Profit Decline Excluding SM Acquisition

Naver and Kakao both recorded their highest-ever sales in the second quarter of this year but showed contrasting expressions. Naver saw balanced growth across its businesses, improving profitability, while Kakao posted a disappointing performance excluding the effect of acquiring SM Entertainment (SM).

On the 4th, Naver announced that its second-quarter sales reached 2.4079 trillion KRW, up 17.7% year-on-year. Operating profit increased by 10.9% to 372.7 billion KRW. Both sales and operating profit were at record highs.

Looking at sales by business segment, the Search Platform recorded 910.4 billion KRW, a 0.5% increase compared to the same period last year. Among this, search advertising grew by 4.3% to 689.2 billion KRW. This was the result of enhancing product sophistication to improve advertising efficiency despite a downturn in the online advertising market. On the other hand, display advertising fell 9.8% to 217.4 billion KRW due to economic slowdown.

Commerce sales rose 44.0% year-on-year to 632.9 billion KRW. The second-quarter commerce transaction volume increased by 14.8% to 11.9 trillion KRW. The rise in sales was driven by a higher proportion of high-commission brand stores, travel, and the luxury resale platform 'KREAM.'

Fintech sales increased 14.9% year-on-year to 339.7 billion KRW. Naver Pay's second-quarter payment volume grew 21.2% to 14.6 trillion KRW. Among this, external payment volume surged 41% to 6.3 trillion KRW. Offline payment volume also doubled to 1.4 trillion KRW due to integration with Samsung Pay.

Content sales rose 40.1% year-on-year to 420.4 billion KRW. The global webtoon integrated transaction volume increased 8.6% to 444.8 billion KRW. In Japan, the expansion of original content led to a more than 20% increase in paid users. In the U.S., the average revenue per paying user (ARPPU) also grew by over 20%.

Cloud and future technology-related sales amounted to 104.5 billion KRW. This was a 0.4% decrease year-on-year but a 12.1% increase compared to the previous quarter. Among this, business-to-business (B2B) sales were 99.2 billion KRW, up 8.2% from the same period last year due to growth in the public sector.

Unlike Naver, which saw balanced growth across its businesses, Kakao posted sluggish results. Kakao's second-quarter sales were 2.0425 trillion KRW, with operating profit at 113.5 billion KRW. Although quarterly sales exceeded 2 trillion KRW for the first time, operating profit fell 34% year-on-year. Excluding the effect of the SM acquisition, sales declined by 1% and operating profit dropped 41%. This was due to increased costs from the SM acquisition and infrastructure investments.

Both companies have announced a full-scale battle in the second half of the year over next-generation large-scale artificial intelligence (AI). Naver will unveil its next-generation large-scale AI 'HyperCLOVA X' and conversational AI service 'CLOVA X' on the 24th. It will also strengthen cloud-based B2B products. Kakao plans to release a cost-efficient AI model after October. This will be applied starting with corporate customer communication, where Talk Channel partner companies deliver personalized messages to customers using AI.