It may be hard to believe that the country with greater than 100 percent mobile subscriber penetration was late to the smartphone scene, but South Korea didn’t receive their first smartphone until late 2009. But after digesting that fact, it will not be difficult to believe that KakaoTalk, the most popular smartphone instant messaging application in the country, is used by 93 percent of smartphone users. However, the total number of users of KakaoTalk is almost 3 times that of the population of Korea. With 130 million reported users in December 2013 and rapid growth, the company is doing something right.
Veiled in the Mists of Internet Past
The company began way back in the distant past of 2006, before there even were smartphones. It had an auspicious birth as the child of JB Lee and Brian Kim. Brian Kim is formerly of NHN, the company running Naver, one of the two most popular Internet portals in South Korea. Brian left when the company was getting to be around the size of 3,000 to 4,000 employees. He had held the position of CEO of NHN USA, and before that he was the founder and CEO of Hangame, a successful gaming company that had merged with Naver.com to form NHN. But he liked growing a small company up from humble beginnings, so he bowed out and formed Innovation With Internet Lab, or IWILAB.
From 2006 to 2009 IWILAB worked to try to create a bookmarking site called Buru.com and a social ranking service called Wisia.com. Unfortunately, the two were not successful. When the smartphone came to Korea in 2009, the company latched on to this new platform in a last-ditch effort to hit on a successful product. Sirgoo Lee said about that time, “We decided to give it a last shot before we closed up shop.” They split into 3 teams and developed 3 smartphone applications. The first was a public communication service similar to Twitter, called Suda, which means chatter in Korean. The second service was named Agit, Korean for hideout, and focused on private group communication. The third was a multi-user group chat service the company termed KakaoTalk.
The name of the service is unique, and has a story behind it. The Kakao founders hoped that their communication service would bring people close and increase their quality of life, and so they wanted to name their service after something else that increases quality of life already. The team fixated on chocolate, but decided that simply naming their app “Chocolate” would not work. So they picked out chocolate’s key ingredient, the cacao bean, and from there eventually arrived at the term KakaoTalk.
After just two months it was obvious that KakaoTalk was the most popular service out of the three, so the company abandoned the other two projects and focused exclusively on KakaoTalk. Sirgoo Lee said of the group chat rooms, “That was one of the main features that the users really appreciated. And then in the chat room itself, if you sent out a message there’s a number beside the message, which indicates how many people in the chat room haven’t read your message.” That was one of the best features that really attracted users, according to the company, and really made it stand out. The feature is still quite distinctive among messaging applications.
After that first good beginning, the company added several other features that attracted a lot more users in a short amount of time. These features included font size options, being able to edit the names of individual chat rooms, and animated emoticons. These features were so popular with users mostly because they were suggested by the users themselves. Mr. Lee said, “We are really evolving the service based on what users want and so we are constantly listening to their needs.” This has been a guiding principle for the service from the beginning, and one of its greatest strengths.
KakaoTalk began expanding its services in 2010, launching its first non-chat service, the Gift Shop, in December. In October 2011 it built upon that early success with Plus Friends. The next year, in March 2012, it released KakaoStory, and soon after in July there came Kakao Game.
Kakao's Gift Shop was the next step forward from previous online social network store offerings, in that there was no digital content to buy. Instead, the Gift Shop provides what can be called vouchers for sale that one can buy and gift to a friend. Said friend can then take the voucher and redeem it for a physical product like a cup of coffee at Starbucks or a piece of jewelry, a t-shirt, or some ice cream. Its focus on gifting real-world items to friends makes it stand apart from pretty much every other e-commerce experience.
Plus Friends is an excellent innovation in online marketing. The bane of the Internet is online advertising, and even now people can still remember the dark days of flashing, intrusive banner ads begging you to shock a monkey. KakaoTalk took the needs of advertisers and melded them into the social network of its users in a unique way – by giving advertisers a Plus Friend account. Users who are interested in some product or service can become a Plus Friend of that product or service, and receive information and exclusive offers in a chat channel in exactly the same format as you would receive messages from a regular KakaoTalk contact.
KakaoStory was an expansion of KakaoTalk into Facebook’s and Google Plus’s user profile space from the other way round. Where Facebook originally started as a way to share photos and status updates with your friends and then later included real-time chatting, KakaoTalk started with the real-time chatting and expanded to include photos and status updates. Using profile backgrounds, photos, stickers, messages, friends lists, and all the trimmings of a social network, KakaoStory gained 10 million users in 9 days.
Kakao Game was also a good move for the company, because two months after its launch in July 2012, the company finally began to turn a profit. The appeal of real-time group chat rooms combined with competitive online games was undeniable. Kakao Games encourage group cooperation and competition both – your friends who are also playing the game can send you items that you can use to play better, or longer. But the scores of your friends are also shown on a progress or score board within the game, so the urge to beat your buddy’s latest high score is always present. As Sirgoo puts it, “It has been a year and a half since we launched games on KakaoTalk, and the accumulated revenue has reached in excess of 1 billion dollars.”
Flush with the Success of the Present
KakaoTalk now stands at over 130 million users worldwide, at the brink of an IPO in 2015, and with 550 employees. The company believes that its guiding principles and unique corporate culture are the keys to its success so far. “We think it is very important to keep a culture where we encourage debate, where we encourage free communication,” says Sirgoo. “It’s worked pretty effectively until now.”
In Korea’s Confucian-based culture that emphasizes hierarchy and unequal relationships, Kakao stands out as a champion of an open, horizontal work culture. The offices themselves illustrate this, as big rooms full of desks without many dividers or closed spaces. Sirgoo Lee, co-CEO, sits just a few desks down the row from Sonia Im, PR manager, for instance. Also, each person at the company adopts an English-language first name, and everyone else refers to them by that name. This is done to sidestep the titles and honorifics that are so common in Korean-language workplace communication. It can take some getting used to for new hires at the company, but most quickly learn to appreciate the freedom in communication and action that it brings. The founders of Kakao believe that this type of horizontal workplace environment encourages innovation. Communication is further encouraged through Kakao’s in-house communication system, Agit, a web forum in which everyone in the company can see and comment on the Agit pages of other teams. This both lets employees in the company know what everyone else is working on, and gives another avenue for feedback, increasing transparency and communication.
Kakao’s total app offerings are divided into four categories now. There is the social platform, the content platform, the commerce platform, and the marketing platform.
As described by the company, the social platform is Kakao’s greatest asset. It consists of KakaoTalk, KakaoStory, and KakaoGroup, and is the core foundation for all other platforms. The nation’s number one mobile messenger, KakaoTalk, and the number one mobile SNS service, KakaoStory, have attracted tremendous traffic and a tightly integrated social network. These assets are now pioneering the development of a mobile social platform that enables not just the exchanges of everyday life but of valuable information and content. Kakao will continue to experiment with new social platforms such as its latest group communication service KakaoGroup, to develop new social platforms handing users a richer and more convenient mobile life.
The content platform includes KakaoGame, KakaoMusic, and KakaoPage. Through Kakao’s game, music and digital content platforms, users can now share and enjoy music, books, comics and games on mobile together with their friends and family. Kakao’s game platform offers more than 380 titles. Through music sharing service KakaoMusic and digital content marketplace KakaoPage, Kakao continues to expand the mobile content ecosystem to provide greater value to its users.
The commerce platform, in Kakao’s words, strategically combines e-commerce with mobile messaging to enable a new form of consumption for users. Kakao Gifts has brought forth a new consumption trend that delivers not just items but also personal gestures of affection in the form of gift coupons. The range of offerings has expanded from its initial offering of coffee, food, beverages, and convenience store coupons to accessories, cosmetics, digital goods, and household items, all of which users can conveniently send to friends via KakaoTalk. KakaoStyle, another commerce platform that has opened up new mobile commerce channel for online shopping malls, is creating a new approach to mobile shopping, allowing users to share style opinions and information with friends.
Finally, the marketing platform includes Plus Friends and Brand Emoticons. Straying from conventional, intrusive marketing methods, Kakao offers a new genre of marketing that is informative, fun, and optimized for mobile. Plus Friends allows users to choose to receive exclusive news and updates from brands and companies of their choice upon their own will, and Brand Emoticons offers brands a fun way to increase their brand awareness by distributing branded emoticons that users can apply to make their chats more fun. Kakao’s new marketing platform has been recognized for its effectiveness and innovative approach. Kakao continues to experiment and challenge itself with new, innovative and effective mobile marketing platforms.
Letting the Users Choose the Future
Kakao is looking to expand into the rest of Asia this year. The company has begun a full-fledged operation into the Southeast Asian market of Indonesia, Malaysia, and the Philippines, through aggressive localization and mass marketing strategies. These efforts were met with positive results in these countries, with KakaoTalk taking the number one spot in both Google Play and App Store free applications in Indonesia last April. With more than 120,000 subscriptions per day, the service showed notable growth. The app also took the number one spot for social communication applications in both markets in the Philippines and continues to show steady growth.
Kakao is leveraging mass marketing and localization as its key strategies in entering new markets. Kakao aired TV ads in target markets with BigBang, a top Korean idol group, and a popular, local, female singer of each region as KakaoTalk ambassadors, in order to help enhance awareness of KakaoTalk to each market. Kakao continues to showcase subsequent TV ads with local stars as KakaoTalk ambassadors to approach users of each region in a more intimate manner.
When asked what is next for KakaoTalk, Sirgoo says, “We evolved the service based on customer feedback. So we really don’t know which way its going. It started out as a messaging service, but now it has grown to a mobile platform with advertisement, games, music - all sorts of different things. And so its really hard to say, but I think there’s a lot of things that people want to share with their friends through this mobile device. So really, the sky’s the limit.”