Retooling business model

Kakao Talk CEO Lee Jae-beom

Kakao Talk to enter social commerce market

Kakao Talk, Korea’s most popular mobile messenger service, has acquired a social commerce company as part of its efforts to turn lucrative.

But experts say the firm will face difficulties ahead. “There’s no guarantee that Kakao Talk’s bet will pay off as the local social commerce market is going nowhere with unproven and disqualified players,’’ said an industry official by telephone, Tuesday.

Also, Kakao Talk will experience “tougher processes’’ in trust-building over the next few months, he said.

The company has confirmed it bought Thinkreal in the hopes of starting a social commerce service this year.

Thinkreal specializes in collecting discount items from around 500 other social commerce companies and putting them on a mobile platform.

The company uploads around 2,500 discount items and sees 200,000 downloads daily. It also provides a service called Pocket Style that provides fashion information for female consumers.

Kakao Talk is expanding its business portfolio rapidly to try and end two years of deficit. “We have made large investments this year and are trying hard to make a profit,” company Chairman Kim Beom-soo said at an industry event last month.

However, the domestic social commerce market is currently saturated and stalling in growth. Despite the likely struggle ahead, Kakao Talk was positive overall on entering the market, saying it is a “leap forward.”

“We always wanted to enter the social commerce business, but lacked talented developers who specialized in the area,” said a Kakao Talk spokeswoman. “The employees of Thinkreal are experts in mobile commerce and advertising and we believe that good use of their knowhow will greatly help Kakao Talk initiate a social commerce platform.” She said the ultimate goal was to make money from the new investment.

Experts say the move is commendable but say it is too early to determine what outcome it may bring.

“The acquisition comes as no surprise. Social commerce is one of many ways Kakao Talk can earn profit,” Lee Seong-ju, head of Mobile Mondays’ Seoul chapter told The Korea Times over the phone. “The challenges are ahead, because the social commerce
market is saturated and there are many competitors,” he said

“The social commerce market has a bad reputation right now because of many false reports. There are major players involved that provide very similar services to each other. Kakao Talk must differentiate itself, and build a lasting trust with consumers to survive.” Internet giants such as NHN and Daum all have a hand in the social commerce market.

Kakao Talk has around 46 million users, and is the No. 1 mobile messenger service here. NHN’s Line is second with 35 million subscribers and Daum’s My People third with 18 million. If Kakao can find a successful way to instigate that huge user base to use its social commerce business, profits will be huge, Lee said.

Kakao Talk also started testing its mobile voice over Internet protocol (VoIP) service Monday, and expects it to launch in Korea within the year. Overseas services started in February. The delay in starting services here is due to strong opposition from mobile carriers.
The firm also has a game platform under development in cooperation with WeMade Entertainment, which will be released later this month.

“Our priority right now is to strengthen our old services and release new ones in the second half to gain wider recognition,” said the spokeswoman. “We are expanding our businesses to various markets in the hope to make a profit in the near future.”

The company began in March, 2010, and quickly attracted users by highlighting the free aspect of its messenger service. They have been struggling since than to make money and started a service last year that allow users to become friends with Kakao Talk’s client companies and gain product information from them. Kakao Talk has around 150 client firms that use the service and it was the first move that brought in revenue. <Korea Times/Cho Mu-hyun>

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