[Click eStock] "Kakao, New Advertising Monetization Strategy Needed"

Daishin Securities evaluated on the 10th that Kakao needs a new advertising monetization strategy for its stock price to rise. They maintained a 'Buy' investment rating and a target price of 48,000 won.

Daishin Securities forecasted that Kakao's third-quarter revenue will increase by 2.3% year-on-year to 2.0573 trillion won, while operating profit for the same period is expected to decrease by 0.8% to 123.3 billion won. The revenue meets market expectations, but the operating profit falls short. Lee Ji-eun, a researcher at Daishin Securities, explained, "Due to the off-season impact in the advertising sector and the reduction of Chinese commerce advertising, the overall revenue growth rate is expected to continue slowing compared to the previous year," adding, "Content business revenue is also projected to decline year-on-year following the previous quarter."

The researcher stated that Kakao needs a new advertising monetization strategy for its stock price to rise. He said, "Ultimately, the growth visibility of the core business, especially the advertising business, is more important than short-term performance," and diagnosed, "Now is the time for an independent strategy that goes beyond external factors such as the sluggish advertising market and already high digital advertising penetration."

He continued, "There are plans to utilize advertising spaces in tabs other than the chat tab within KakaoTalk and on KakaoTalk-linked platforms, but the pace of business expansion is slow," adding, "Also, although there are plans to launch a new artificial intelligence (AI) platform by the end of the year, since it is a new service, it is still considered too early to have a monetization plan through advertising." He further added, "Since the traffic on the platforms serviced by Kakao is steady, a new advertising monetization strategy utilizing this traffic needs to become visible for a sustained upward trend in the stock price to be possible."