Why you’ve maybe never even heard of Kakao
According to Interbrand’s international list of the top 100 brands, four of the top five brands are all American corporations. In fact, a full two thirds of the top 20 brands are American. If you look at the whole list, US brands account for more than half.
Maybe that’s why we sometimes have a tendency to talk like the American version of a thing is everyone’s version of that thing.
Then there’s also the mere fact that so much of the technology we hold in our hand seems to revolve around America’s tech giants. Take Facebook, for example. Not only is Facebook the dominant social media platform the world over, but Facebook is also the dominant messenger in most of the world. WhatsApp and Messenger, both Facebook-owned products, each have over a billion global users. It’s the reigning champ.
Here’s where you have to start paying attention, because even in a country like South Korea, where Facebook is the preferred social network, there’s competition in the messenger space. It’s called KakaoTalk. Although, with 99% of Koreans using KakaoTalk frequently, I’m not sure we can still call it “competition.” It looks more like domination.
It’s an app! It’s a company! It’s an empire?
It started with KakaoTalk, South Korea’s most popular messaging platform, back in 2010. Then Kakao branched out, adding a social network called KakaoStory, a gaming service, premium accounts (called “YellowID” or now, “Plus Friends”), and even a mobile payment service.
Then in 2014, Kakao merged with another of Korea’s internet wunderkind, Daum, to form Daum Kakao. Daum was more like an AOL back in the day, offering a plethora of services like mail hosting, webpage hosting, video hosting, a search portal, maps, and a particular kind of forum still popular in Korea called “cafes.”
KakaoTalk is still a darling of Daum Kakao. As of September, 2016 KakaoTalk has 49.1 million active users worldwide. Facebook has about 16 million monthly active users in South Korea, and KakaoTalk has 41.49 million. That’s 41.49 million in a country of 50.62 million. Think about that for a second.
It’s not just the user numbers that boggle the mind. Now that they’ve merged, it seems like Daum Kakao are taking over the smartphone too. Daum Kakao swallowed up several apps and services, including Loen Entertainment’s hit streaming platform Melon, Podotree’s webtoon service, and another social network popular in Southeast Asia called Path.
Between the acquisitions and launches, Kakao Corp. now offers 20 different apps for iPhone, and number of services accessible in the KakaoTalk app itself. In the transportation category, now there’s GPS app KakaoNavi, trip planners KakaoMetro and KakaoBus, even a taxi hailing service called KakaoTaxi. In lifestyle, Daum Kakao has a grocery shopping service, a food delivery service, a fashion and style shopping platform, and a domestic travel guide. There’s a Korean-language version of Medium called Brunch, and a private team chatting platform called Agit. Kakao has not just one, not two, but six different social networking apps, with no signs of slowing down. Sometimes it feels like the list of categories Kakao doesn’t operate in is shorter than the list of ones it does.
As an outsider, you can look at all the add ons to KakaoTalk and assume it’s bloated. Well, maybe it is, but it’s also effective. It’s not just that KakaoTalk has reached virtual 100% market penetration in South Korea. It’s that in an average month, Koreans are spending almost 850 minutes in KakaoTalk. Compare that to the paltry 28 minutes a month surveys reveal they spend with Facebook Messenger.
It’s also profitable.
In the first quarter of 2017, Kakao saw about $393 million in revenue, $198 million of which were from content including KakaoTalk’s emoticon marketplace, and $34 million in operating profit.
Perhaps the most interesting part about Kakao is that in just a year, the company has seen a big shift in revenue source. In the first quarter of 2016, the majority of Kakao’s revenue was driven by transactions on it services. In a year, that’s changed. It’s now Kakao’s content — emoticons, games, music, and even online comics — that seems to be fueling a good half of Kakao’s engine.
How KakaoTalk got (and kept) the throne
When KakaoTalk first launched, the smartphone was just coming into popular use in Korea. KakaoTalk’s biggest competitor came from cross-town rival Naver, sometimes called the Google of Korea. Naver’s competing messenger LINE is still around, but back then KakaoTalk had a first mover’s advantage.
As the first free, unlimited alternative to regular SMS messaging, KakaoTalk spread like wildfire. The more new users that were on KakaoTalk, the more useful it was to all users, cementing the app’s place in Korean society.
To wit, KakaoTalk was so heavily entrenched in popular culture, even LINE seemed to switch focus to other international markets once it appeared taking on Kakao on home turf would be next to impossible.
The now-defunct app My People was also a surprisingly strong contender. It was the first in Korea to have a PC-ready version that synced messages between your smartphone and your computer. Once KakaoTalk added a desktop client though, it was more or less game over for My People.
All these features helped KakaoTalk become the reigning champion, but keeping the title? Enter AniPang.
AniPang was a casual Candy Crush-like game users could play through KakaoTalk. It became a craze in Korea in 2012, and the hit eventually migrated to other countries like the Philippines by 2014. Because KakaoTalk connected users with their pre-existing contacts, Kakao’s social games were able to connect users with their friends automatically on a virtual scoreboard. Within a year of the game platform’s launch, KakaoTalk had generated 400 million game downloads and expanded its user base to 30 million.
Gaming has become a key component of messaging for the Korean market, and again KakaoTalk had an early advantage. Facebook Messenger is currently the closest competitor to KakaoTalk, with roughly 30% of the market using Messenger frequently, but Facebook’s Instant Games platform is a comparatively recent addition to the service.
We see other international messengers scrambling to keep up with some of the most beloved features of KakaoTalk too. Last year Telegram announced features aimed specifically at meeting the needs of the Korean market, including a emoticon sticker marketplace similar to KakaoTalk’s and voice chatting features.
Telegram is a particularly interesting case, since it was a much more recent challenger to the throne. In 2014, claims that KakaoTalk disclosed private user information to the South Korean government sparked an exodus of around 400 thousand users from KakaoTalk to more secure messengers in general, and German-made encrypted Telegram in particular.
Telegram wasn’t able to keep the users though. Like Messenger, Telegram’s bot-powered gaming platform is still in its first year of operation, and its emoticon marketplace isn’t nearly on the scale of The Kakao Friends characters and KakaoTalk’s sticker store.
So what does all this mean?
There’s a larger lesson to be learned in Kakao and its success.
As far-reaching as American giants like Facebook and Google are, they aren’t the whole story. All over the world in emerging markets we see examples of local competitors that, through varying combinations of culturally sensitive approaches, hyper-localized service offerings, and aggressive policy, have managed to stake out a position towards the top of the mountain and not just gain their footing, but keep it.
It’d be easy to call Kakao a special case, but the truth is, South Korea has always had number of homegrown market leaders. The search engine Naver has long dominated the search engine landscape, and its biggest competitor is, you guessed it, Daum Kakao. Google trails way behind, capturing only a mere percent or two of the Korea market.
There’s other areas where South Korea bucks the global trend too. Livestreaming is already mainstream in Korea, where platforms dedicated to live content like YouTube competitor Afreeca TV and Naver’s V Live have gained an impressive foothold. In fact, while some countries are still waiting for user-generated live streaming to catch on, a recent Nansmedia survey found almost 80% of Korean internet users had used a live streaming platform in the last twelve months.
This means that if you want not just to reach, but to understand the South Korean market, you have to be looking at KakaoTalk and all its myriad features and spinoff services.
What can we expect see from Kakao going forward?
Daum Kakao admitted they aim to make KakaoTalk a central part of their users’ daily lives, but if you look at messaging in South Korea by the numbers, it seems they already have. However, if you look at the global messaging pie, KakaoTalk has just a tiny sliver of it.
Currently, competitor Naver’s LINE has easily 4 times the global monthly active users Kakao does, 70% of which come from users outside of Korea in countries like Japan, Thailand, and Indonesia.
Clearly global expansion will be key to Kakao’s continued success, and has been a company goal since 2011. As Kakao Chairman Kim Beom-su was saying to the press even back then, Kakao’s future is dim unless they can stay globally competitive. As of 2017, there’s a few big additions to the Kakao suite of services planned to help the company stay relevant and competitive.
For one, this summer Kakao plans to launch an app with voice-controlled AI that will help you message handsfree and compete with other virtual mobile assistants. This AI will be scaled across a number of Kakao services. Kakao is also planning to launch in the third quarter something called Kakao Momentum, a customizable ad platform.
In addition to the expansions, just this month The Bell reported on rumors that Kakao might sell a significant chunk of its mobility business unit, a stake valued at roughly $446 million, to private equity firms ORIX and TPG Capital.