Kakao trying to 'duplicate' Amazon's business model - Korea Times
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Kakao trying to 'duplicate' Amazon's business model

By Baek Byung-yeul

Kakao, the country's biggest mobile messaging app operator, is speeding up its mission to "duplicate" the business model of U.S.-based e-commerce titan Amazon, in an attempt to establish a business empire encompassing online shopping, online comics and novels, media content and logistics, industry analysts and officials said Tuesday.

Amazon is the world's largest e-commerce business operator, logging $108.5 billion in sales in the first quarter, a 44-percent increase year-on-year. The U.S. retail giant is even expected to overtake Walmart to become the largest U.S. retailer by 2025, according to market tracker Research Insight. Based on its powerful platform, the company has shown its prominence in the cloud-computing business as well.

Among many IT firms doing platform-based businesses in Korea, Kakao is regarded as the closest player to follow the successful path of Amazon. With its popular messaging app that has more than 46 million monthly active users, Kakao is expanding into various business fields, such as e-commerce, media content, online banking and even cryptocurrency exchange.

The company is slated to announce its first quarter performance on Thursday. The market consensus expects that the company will be able to generate 1.24 trillion won in sales and 153.8 billion won in operating profit, up 43 percent and 74 percent respectively.

Industry analysts have said that the company will make such an improved performance thanks to the growth of advertising via its KakaoTalk messenger app, e-commerce, mobility and content businesses.

In the e-commerce sector, Kakao recently announced that it has acquired Croquis, the operator of local fashion shopping platform ZigZag. Though it didn't reveal the details of the contract, multiple media sources indicated that Kakao was presumed to have paid nearly 1 trillion won.

After the acquisition, Kyobo Securities analyst Park Ji-won raised the corporate value of Kakao to 7.3 trillion won, expecting that the company will have increased transactions in the e-commerce sector. "35.9 percent of the sales growth in the first quarter is expected to come from advertisements on KakaoTalk messenger and e-commerce businesses," the analyst said.

The analyst added that Kakao's taxi-hailing service and media content service are also forecast to see big growth. "The taxi business will show high growth and the paid membership business will be reflected in sales records, which will reach 531.7 billion won this year alone."

Another analyst said that Kakao's outlook will remain upbeat thanks to the fact that Dunamu, the operator of Korea's largest cryptocurrency exchange, Upbit, is pushing to be listed on the New York stock market. Kakao holds a combined 21.3 percent stake in Dunamu.

"Dunamu is estimated to log 590 billion won in sales and 544 billion won in operating profit in the first quarter. Kakao is expected to earn roughly 100 billion won in equity profits," Yuanta Korea Analyst Lee Chang-young said.

To further improve its competence in the global media content market, Kakao is reportedly in talks with the global online web platform, Radish. By acquiring Radish, the fifth-biggest web novel platform in the U.S., which converts novels to different kinds of media sources, such as television drama, movies or animated film, the company aims to beef up its intellectual property business.

Another industry source said that the chances are increasing that Kakao will collaborate with U.S. media giants Netflix or Disney. "Based on Kakao's powerful messenger platform, the U.S. media giants think they can leverage their content business," the source, who requested anonymity said.

Baek Byung-yeul baekby@koreatimes.co.kr


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