Kakao bets on games, social commerce
Although it is the talk of the town for launching a free Internet call service, Kakao Talk, the No. 1 mobile messenger operator, is still lacking where it counts most ― a viable business model.
Its CEO Lee Sir-goo, obviously buoyed by a huge subscription base and recent attention for taking on the nation’s mobile carriers, doesn’t have an ace in the hole to instantly turn around its two-year losing streak. But he believes that a turnaround may come eventually, thanks to its over 50 million subsribers which has huge "potential."
“We will launch a game platform next month after a beta test, and though we will give partner WeMade Entertainment preemptive rights as an investor, we plan to launch many new games from different providers,” Lee said during a recent interview. He leads Kakao together with Lee Jae-beom.
“The delay in some of the projects is due to our desire to create a lasting business model for our services that are both profitable and significant,” he said.
Also included in its step-by-step approach is a social commerce business with Thinkreals, which Kakao recently purchased.
“We do have a social commerce model under development, which the employees of Thinkreals will assist in, but it will have a distinctive Kakao color to it,” he said.
Lee was understandably passionate about the ongoing duel with carriers over its free mobile voice over Internet protocol (m-VoIP).
He denied their claims that Kakao’s free service would eat away at their profit base, charging the carriers with foul play.
“Telecommunications companies are intentionally lowering the quality of our Voice Talk (Kakao Talk’s free call service), which they have the technology to do,” said the CEO. “The decrease of quality (caused by them) I think has lowered the number of calls, while we receive user complaints.”
“I don’t know if they intended it or not, but we are the ones taking the blame,” he said. “I am very thankful to LG Uplus for making a brave decision, which I think consider in the users’ interest. But they have not yet unblocked access.”
m-VoIP is just the tip of the iceberg on the issue of network neutrality. Network neutrality is an assertion by content providers, such as Kakao Talk that they should be allowed complete use of networks whatever content transmitted.
“Network neutrality is needed for many companies like us that do creative things to emerge. The most important thing in the mobile business is coexistence. Based on a stable and high quality network, the hardware industry and content providers like us benefit each other, which leads to more subscribers for mobile carriers,” Lee lamented.
There is much speculation as to why Kakao Talk has developed and launched m-VoIP services. Some believe that it is attempting to end two years of losses.
Lee says that there was absolutely no profit consideration for the free call service, while the real reason was that the company felt that it was a must-have, fun feature to make the messenger service more compelling.
“Despite rumors that say otherwise, our main business is the messenger service and Voice Talk is secondary to that. If you try our Voice Talk, you know you log onto it through our messenger first, and it is one of many click-on items that enhance the chat experience.”