Careers at Kakao
Kakao’s (“Kakao”) vision is to “Connect Everything”. It does this through smarter, broad-reaching connections that allow information to flow freely and effectively, businesses to grow organically, and people to live better lives.
Kakao splits its business into four segments, Communication, Media & Content, Games, and Lifestyle, from which it derives three main revenue streams, Advertising, Gaming, and Commerce. Kakao’s strategy appears to be to build an ecosystem around their suite of mobile apps that range from communications (KakaoTalk) to mobile payment systems (KaKao Pay).
Kakao is the company formed after the merger of Kakao and Daum, and leverages on the market position and expertise of both companies.
- Communication – Communication appears to be Kakao’s mainstay offering, with KakaoTalk being the world’s first mobile messenger platform and Daum Mail being Korea’s first free email service. Aside from these two key offerings, other apps include Daum Café (a forum service), KakaoStory (social media app using images, video, and text – similar to SnapChat and Instagram), Plain (social media app similar to Pinterest), brunch (blogging and article platform), and slush (real-time social media platform similar to SnapChat).
- Media & Content – Kakao also provides platforms by which media and news content can be created (in some cases by users) and disseminated. Daum News, Story Funding (crowdfunding platform), KakaoPage (media content feed – webcomics, e-books, videos, etc.), Daum Webtoon, StoryBall (trending video feed), Daum Movie, KakaoMusic, Kakao Tv, Daum tvPot (news and media highlights), KakaoStyle (fashion feed), Daum Books, and Daum Real Estate.
- Games – Kakao derives a significant part of its revenue from gaming services – delivered through Kakao Game and its e-commerce platform, Kakao Gameshop.
- Lifestyle – Kakao has also introduced a suite of apps that are designed to streamline every day for its consumers. These include ride-sharing and aggregation programs such as Kakao Taxi and Kakao Driver, everyday navigation such as Daum Maps, Kakao Navi, Kakao Metro, Kakao Bus, and Kakao Place. It also has an e-commerce and communication platform for small businesses, called Kakao Talk YellowID.
Aside from the above segments, Kakao has also been expanding into other areas. One key area is fintech, where Kakao has introduced mobile payment services through KakaoPay and Bank Wallet Kakao. It also has other miscellaneous apps such as Daum Search and Kakao Talk Sharp Search.
The current company, Daum Kakao, was formed from a merger of two major Korean companies – Daum, and Kakao. Daum was established in February 1995, as Daum Communications Corp. In May 1997, Daum launched the first free email service in Korea, called Hanmail. Daum was a highly dynamic company, suitable for its industry.
Over the next decade, it launched a number of highly successful, innovative, initiatives – these include Daum Café, Daum Search, Daum Media, tvPot and Daum Shopping. These initiatives slowly built up Daum’s presence in the Korean web space – with everything from blogging and shopping to search services (i.e. search engines) being covered by Daum’s products. In 2001, Daum set up the Daum Foundation, its corporate social responsibility arm.
Another significant development is Daum’s 2004 acquisition of half of Lycos, a search engine and web portal known for platforms such as Angelfire and Tripod.com, from Terra Networks, Telefonica’s internet arm. The most visited website in 1999, Lycos was a victim of the dot-com bubble in the 2000s – it was purchased by Terra in 2000 for $12.5 billion, but was broken apart and sold 4 years later in 2004 to Daum at $95.4 million. With its attempt at entering the American market an abject failure, Daum later sold Lycos for $36 million in 2010 – a deal that later turned sour due to financing issues.
In 2006, the predecessor to Kakao, called IWILAB, was established. IWILAB changed its name to Kakao in 2010, launching KakaoTalk in March of the same year. KakaoTalk went on to become Kakao’s flagship offering, with extra features, such as gift shops and free calls, being tagged on over time. Kakao also expanded into other businesses, such as gaming (through Kakao Game), blogging (through Kakao Story and Kakao Page), music (through Kakao Music), and others, from 2012 to 2014.
Daum and Kakao merged in October 2014. The deal was structured as a reverse takeover, and resulted in a combined company worth over 4 trillion Korean Won (~USD4 billion). The combined company, called Daum Kakao, was renamed Kakao in September 2015. It acquired Path, a US social media platform, in 2015, and is set to acquire LOEN Entertainment, the biggest music streaming service in Korea, in 2016.
Business model of Kakao
As a company focusing on social media and mobile platforms, Kakao’s main target audience is retail consumers, who use its messaging app, KakaoTalk, and the accompanying suite of services. It also targets businesses who want marketing and e-commerce access to its base of retail consumers.
- Advertising – Leveraging on its massive user base, Kakao is able to provide access to a significant proportion of Korea’s population – particularly young, middle and upper class, consumers with significant spending power. Due to this, Kakao’s advertising revenue contributes well over half of its total revenue.
- Gaming – Kakao also provides gaming platforms with both internally produced and third-party produced games which are sold to the retail consumer. This segment contributes around quarter of its total revenue.
- E-commerce – Kakao also provides businesses with e-commerce access to its user base. This segment contributes a minor proportion, under 10%, of its total revenue.
Through its flagship app, KakaoTalk, Kakao has built up a massive user base and an ecosystem through which a myriad of services are provided. This, to consumers, provides a convenient platform by which everyday services can be obtained. This, combined with Kakao’s trusted brand, makes it a draw to consumers.
Kakao’s massive user base is also a draw to businesses who require access to retail consumers.
Further, Kakao’s offerings are well-designed and targeted at particular consumer groups, filling a gap that it sees in the market – these products thus tend to be well-received by retail customers, building further its brand.
These apps, save for games, are usually free – costing consumers nothing to try.
The massive user base is also self-perpetuating in that online communities are formed that can only be accessed through Kakao’s apps.
Kakao’s main channel to consumers is through its mobile apps, which can be found on major mobile operating systems (i.e. iOS and Android).
Kakao maintains its relationships with its retail customers through its mobile apps, and over the phone. This consists of a combination of self-service, through online FAQs and troubleshooters, and guided support through live chats.
Kakao focuses on developing and distributing mobile apps, particularly in social media and services, to retail consumers. These apps are provided free, and are used as means by which Kakao may acquire revenue through advertising and e-commerce sales.
Kakao has many key partners, depending on its business segments. Its e-commerce platforms are aimed at allowing businesses access to online retail markets – these businesses are thus key partners. The same arrangement applies also to its games platforms, which allow game developers access to retail consumers. Kakao also gains revenue from businesses seeking to advertise on its platforms – these businesses are also key partners.
Quite aside from these revenue streams, Kakao also partners with content providers to provide content for its platforms. These providers can come from its user base but some come from other more commercial sources. One example of the latter is Kakao’s 2016 partnership with the Singapore Tourism Board under which a new mobile platform, called Traveline Singapore, will be introduced to bring travel content on Singapore to Koreans.
Kakao’s key resource by far is its accumulated goodwill, which takes up well over half of its total assets. In terms of other assets, Kakao does not hold very much in terms of tangible assets, with the next major asset class being cash.
Aside from balance sheet items, Kakao’s other key resources would be its talented workforce – especially its business strategy and programming talent.
Kakao’s major expenses are labour costs, and commissions to third parties – both of these each take up slightly under 30% of its operating expenses. Other key costs include ad agency fees and content fees.
Kakao’s key revenue streams are from advertising, sales of games and gaming subscriptions, and e-commerce.
|Source of Revenue/Cost||Revenue (FY 2015, million Korean Won)||% of Total Revenue|
Ad Agency fees
info: Jimmy holds a Master of Science in Industrial Engineering from KAIST. He was the CEO of Kakao prior to its merger with Daum – he continued to be the CEO post-merger. Before that, he was the founder and CEO of K Cube Ventures, and a Principal in Softbank Ventures Korea. He started his a career as a consultant with BCG.
info: Brian holds a Master of Science in Industrial Engineering from Seoul National University. He was the Chairman of Kakao prior to its merger with Daum – he continued to be the Chairman post-merger. Before that, he was the CEO of NHN USA, NHN Corporation, the Co-CEO of NHN Corporation, Naver.com. He also founded Hangame Communications.
info: Andy holds and LLM from Kyushu University and an LLN from Seoul National University. He was the CLO of Kakao prior to its merger with Daum – he continued to be the CLO post-merger. Before that, he was a Managing Partner at Chungo LLC, Sehan LLC, and Jipyong Jisung Attorneys at Law. He founded and was the Managing Partner at Jisung Law Offices.
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