South Korean mobile messenger app expands reach into Asia

November 6, 2013 Leave a comment

November 5, 2013 9:30 pm

South Korean mobile messenger app expands reach into Asia

By Song Jung-a

In South Korea, nearly all smartphone users are KakaoTalk subscribers. Kakao Corp brought “mobile big bang” to the country by launching the popular messaging service three years ago. Now, it is the main means of communication among smartphone users. KakaoTalk boasts 110m registered users, with 40 per cent of them believed to be from outside South Korea. They enjoy free instant messaging, photo sharing, mobile games and shopping on its platform.It was the first mobile messenger to open its platform to mobile games. A video game called Anipang, offered on its KakaoTalk platform, became almost a national competition last year, with about one-fifth of the 50m population playing it on a daily basis.

The growing popularity of its mobile games – the company now offers about 270 on its platform – helped it turn a profit last year. It posted a net gain of $6.5m in 2012 on revenues of $42m, collecting about $29m from mobile games and shopping.

KakaoTalk is the latest success story of the software industry, one of the few areas not dominated by big conglomerates such as Samsung and Hyundai, in the manufacturing-driven economy. South Korea has a vibrant internet software industry, represented by search engine NHN, global online game maker NCSoft, and leading antivirus software maker AhnLab.

Building on its domestic success, KakaoTalk is expanding abroad as soaring mobile web traffic offers new growth drivers to internet companies and game developers. It is offering mobile messaging services in 230 countries in 13 different languages, across all major mobile operating systems. In addition to free messaging and mobile games, the company has added a range of services, including music, digital content, mobile shopping and business marketing.

“We have secured enough user pool at home. It is time to go global,” says Lee Sir-goo, joint chief executive of Kakao. “We are the most advanced in terms of mobile service experiences and knowhow.” Kakao began its attempt to break out of South Korea with its push into Japan in 2011, by joining forces with Yahoo! Japan to challenge Line, Japan’s dominant mobile messenger service with 240m users. It is trying to expand its reach into southeast Asia – in Indonesia, the Philippines, Malaysia and Vietnam, where there are no dominant players. Line, owned by NHN, has a strong presence in Taiwan, Singapore and Thailand, while China and Hong Kong are dominated by Tencent’s WeChat with 200m users.

“We see strong growth potential in southeast Asia, given its strong messenger need, similar culture and their preference for the Korean Wave,” says Mr Lee.

Like other big manufacturers Kakao has been benefiting from the widespread popularity of South Korean music and television shows in the region. To raise its profile in southeast Asia, Kakao aired TV ads featuring Bing Bang, a Korean pop idol group, which helped the company attract more than 120,000 subscribers a day in Indonesia in April. KakaoTalk became one of the most popular chatting apps in the Philippines, and is making rapid inroads into Malaysia through a partnership with Friendster, the leading game and social networking services in southeast Asia.

Despite the huge success at home of KakaoTalk, analysts have mixed views about its overseas business because of the past failures of South Korean internet companies abroad. Portals and search engines, such as NHN and Daum, began to venture overseas in the early 2000s, but have struggled to make inroads into other countries due to language barriers.

Mr Lee stresses that localisation is the key to winning the hearts of smartphone users abroad. “If you take a mobile app that works in Korea to a foreign market without tailoring it to local tastes, you cannot succeed there. Overcoming cultural differences is the key to spreading your services.”

Analysts say it will not be easy for KakaoTalk to steal a march on its bigger rival Line, which is best poised to see the highest adoption rates in Asia. But they believe KakaoTalk can still make some inroads, offering an Asian alternative to western services like WhatsApp, Facebook and Twitter.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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