Rim Ji-hoon |
In a regulatory filing Thursday, Kakao said it posted 16.1 billion won ($13.9 million) in operating profit in the July-September period, down 47 percent from the same quarter a year ago. Sales were 229 billion won, up 4 percent compared with the previous year.
Kakao operates Korea's largest mobile messenger application, KakaoTalk. The company's financial hit has been attributed largely to a sales decline in its two major revenue sources ― advertising and gaming. The company said advertisement sales in the quarter were 142 billion won, down 5 percent from the previous quarter. It said the decline is due to seasonal factors, and this will increase during the year-end peak season.
Gaming platform sales in the third quarter were 51 billion won, down 24 percent from the previous year.
"Revenue from advertisements is our cash cow, but we failed to meet market expectations in our advertising business," Kakao Chief Financial Officer Choi Sae-hoon told investors and analysts during the regulatory filing. He said the company will make efforts to develop new mobile-based advertisements to improve its marketing performance.
Before announcing the company's quarterly performance, Choi expressed gratitude to the company's former co-CEO, Lee Sirgoo, who offered to resign from the company on Tuesday.
"Kakao and all the employees appreciate his efforts for the company and will always support him," Choi said.
The company did not reveal details of Lee's sudden departure. But market analysts say Lee was under extreme pressure over a recent investigation by prosecutors.
Last week, the Suwon District Prosecutors' Office indicted Lee without detention on charges of violating the Juvenile Sex Protection Law. The prosecution previously said Lee did not block child pornography from being shared online when he served as co-CEO of Daum Kakao. The company removed Daum from its name in September, in a move to solidify its corporate identity.
The resignation came about two months after Kakao named Rim Ji-hoon, the former head of K Cube Venture, as CEO, replacing co-CEOs Lee Sirgoo and Choi Sae-hoon. K Cube Venture is a Kakao affiliate.
Under the new leadership, the company expected it will gain new momentum to better deal with the rapidly changing mobile platform business.