Seeking Qualitative Growth
South Korea’s top chat app operator Kakao Corp. which has been leading technology innovation with various services is now seeking to make “profit” and “innovation” at once. The company will charge some taxi services and put the management in front to achieve a qualitative growth. It also considers blockchain as a core next-generation technology and plans to launch its own blockchain platform by the end of this year.
After Kakao announced its plan to introduce “prior calling” and “immediate allocation” services in its mobile taxi-hailing app “Kakao Taxi” on March 13, the company saw its stock prices increase 5,500 won (US$5.16), or 4 percent, to 140,500 won (US$131.80) compared to a day earlier. Kakao will start charging fees for some services so that consumers can take a taxi faster than others when they pay an extra fee for the services other than fares.
With Kakao unveiling the new plan that help it monetize its fast growing user base at a time, the company has started attracting foreign investment again. Foreign investors, who net sold 778 billion won (US$729.83 million) of Kakao stocks during the first two months of this year alone, bought 184.4 billion won (US$172.98 million) this month alone. The price of Kakao shares closed at 129,500 won (US$121.48) on the 9th, up 500 won (US$0.47), or 0.39 percent, from the previous trading day.
Kakao also catches the headlines in another plans to boost sluggish sales of its cash cow, including advertising, by appointig new co-CEOs – Yeo Min-soo, executive vice president of advertising, and Joh Su-yong, head of Kakao Brand Center.
However, Kakao still focuses on new business as well. The company’s artificial intelligence (AI) subsidiary “Kakao VX,” former “Kakao Brain,” which is led by founder and board chairman Kim Beom-soo, will use a platform strategy based on its AI speaker “Kakao Mini.” For the global market, it will also work on new business by collaborating with “Ground X,” a Japan-based, wholly-owned blockchain subsidiary.
Such new changes receive favorable reviews from the securities industry. Sung Jong-hwa, an analyst at eBEST Investment & Securities Co., said, “Kakao hasn’t revealed the exact time and fee for Kakao Taxi’s paid services and the company’s main services, like Kakao Pay, are still available free of charge. The concentration of all the pre-investment costs has lowered its profit estimates by a large margin but it is just a transitional difference in estimation between sales and costs and not the factor that lowers the value of the company.”
Kakao still has a lot of things to get through. Consumers who have used Kakao Taxi for free until now show strong opposition to the new plans. Some critics say that the new paid prior calling and immediate allocation services actually make users pay a charge twice over. The Ministry of Land, Infrastructure, and Transport said it will keep considering whether the new paid services have a legitimacy. Accordingly, Kakao’s charging fees for Kakao Taxi is expected to be the first hurdle that decides its next move in the future.