Kakao Corp., the operator of the immensely popular mobile messenger app Kakao Talk, on Thursday reported an almost 65 percent plunge in net profit in the first quarter due to its slowing ad sales and increased costs.
The company’s net profit was down 64.5 percent to 10.9 billion won ($9.3 million) in the first three months of the year compared to a year ago. Its sales rose 3.5 percent to 242.4 billion won during the same period.
The company said its ad business suffered seasonal weak demand in the first quarter, while its spending increased together with its business expansion. In the first quarter, its operating cost surged to 221.4 billion won.
“We will continue to make new investments in the second quarter. Please pay more attention to our sales growth rather than operating profit for the time being,” chief financial officer Choi Se-hoon said during a conference call.
He predicted the company’s sales could exceed 300 billion won in the second quarter, largely driven by its content business sales.
Kakao has recently been putting in considerable resources into its sprawling online-to-offline business. Following the launch of its taxi-hailing app KakaoTaxi in March last year, the company has also launched KakaoDriver, a chauffeur service, and KakaoHairshop, a mobile hair salon booking service.
During the conference call on Thursday, the company also said it was preparing to launch two new services KakaoParking, an app that helps search for parking lots and fee payment, and KakaoCleaning, an app for hiring housekeepers.
KakaoTaxi is a popular app which has seen 8.6 million calls over the past year. But Kakao has yet to see profits from the service as it offers the platform free both for drivers and passengers, possibly so that it will be used more widely in its earlier phase.
“We are discussing diverse ways for the monetization of the service. We will come up with more concrete plans for the service in the latter half of this year,” Choi said. The company plans to receive some commission from other planned services.
He also predicted that the company’s business synergies from its recent acquisition of Loen Entertainment, the operator of Korea’s top online music streaming service MelOn, could come in the latter half of this year. The company acquired Leon in March for 1.87 trillion won.
By Lee Ji-yoon (
jylee@heraldcorp.com)