Naver and Kakao Stock Prices Decline Consecutively
Market Share of Core Businesses Like Search and Messenger Decreases
Growth Prospects in AI and Other New Engines Remain Uncertain
The market capitalization of South Korea's two major platforms, Naver and Kakao, has dropped by nearly 15 trillion won in the first half of this year. The biggest reason cited is the lack of clear achievements in new growth engines such as artificial intelligence (AI), amid threats to their core business shares in search and messenger services.
On the 8th, Naver and Kakao shares opened at 168,000 won and 41,300 won respectively. Compared to the peak at the beginning of the year, they fell by 27% and 33% respectively. The combined market capitalization of the two companies was 45.702 trillion won, down 14.828 trillion won from the end of last year.
The decisive factor behind the weak stock performance is the uncertainty of the next growth engine. Naver CEO Choi Soo-yeon and Kakao CEO Jeong Sin-ah have prioritized boosting stock prices through qualitative growth, but so far, their efforts appear to have failed.
Naver is facing intensified competition in search and shopping services. According to web analytics firm Internet Trend, Naver's web search market share fell from 61.9% in January this year to 57.8% in July. During the same period, Google, ranked second in market share, increased by 5 percentage points. In the shopping sector, Chinese platforms AliExpress and Temu have launched aggressive low-price strategies, while recently YouTube has enhanced its live shopping features. Due to intensified competition, Naver Shopping's transaction volume showed a decline for the first time on a quarterly basis. In the first quarter, transaction volume was 12.2 trillion won, down 200 billion won from the previous quarter.
The future growth engine remains unclear. Although Naver introduced its proprietary AI HyperCLOVA X into its search function, it has not become a breakthrough to regain market share. Additionally, negative impacts from the Line Yahoo issue have added uncertainty. Naver stated, "We will not sell Line Yahoo shares in the short term," but uncertainty in global business has increased.
Kakao is in a similar situation. According to data analysis solution Mobile Index, KakaoTalk's monthly active users (MAU) have remained in second place throughout this year after losing the top spot to YouTube in December last year. This is the result of users dispersing to platforms like YouTube and Instagram.
Concerns also arise over the performance of subsidiaries that drove external growth. Kakao Mobility changed its accounting standards due to allegations of accounting fraud, resulting in decreased sales. In the first quarter, sales were 153.3 billion won, down 66.9 billion won compared to the same period last year before the accounting change. Furthermore, the launch of a new taxi brand with a reduced franchise fee of 2.8% is expected to worsen profitability. Kakao Entertainment and Piccoma, which operate webtoon businesses, are expected to increase marketing expenses as competition intensifies due to Naver Webtoon's Nasdaq listing issue.
AI new business developments have been silent for a long time. Although Kakao plans to launch AI-integrated services in KakaoTalk in the second half of this year, market expectations have weakened. This is because the situation of only announcing new AI services since last year has continued. Kim Jin-gu, a researcher at Kiwoom Securities, analyzed, "Even after management changes, they have not shown an AI strategy that permeates major businesses," adding, "The value of data will be diluted over time, and the probability of losing AI competitiveness is increasing."
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