Businessmodel of Kakao

Customer Segments

As a company focusing on social media and mobile platforms, Kakao’s main target audience is retail consumers, who use its messaging app, KakaoTalk, and the accompanying suite of services. It also targets businesses who want marketing and e-commerce access to its base of retail consumers.

• Advertising – Leveraging on its massive user base, Kakao is able to provide access to a significant proportion of Korea’s population – particularly young, middle and upper class, consumers with significant spending power. Due to this, Kakao’s advertising revenue contributes well over half of its total revenue.
• Gaming – Kakao also provides gaming platforms with both internally produced and third-party produced games which are sold to the retail consumer. This segment contributes around quarter of its total revenue.
• E-commerce – Kakao also provides businesses with e-commerce access to its user base. This segment contributes a minor proportion, under 10%, of its total revenue. ### Value Proposition

Through its flagship app, KakaoTalk, Kakao has built up a massive user base and an ecosystem through which a myriad of services are provided. This, to consumers, provides a convenient platform by which everyday services can be obtained. This, combined with Kakao’s trusted brand, makes it a draw to consumers.

Kakao’s massive user base is also a draw to businesses who require access to retail consumers.

Further, Kakao’s offerings are well-designed and targeted at particular consumer groups, filling a gap that it sees in the market – these products thus tend to be well-received by retail customers, building further its brand.

These apps, save for games, are usually free – costing consumers nothing to try.

The massive user base is also self-perpetuating in that online communities are formed that can only be accessed through Kakao’s apps.

Channels

Kakao’s main channel to consumers is through its mobile apps, which can be found on major mobile operating systems (i.e. iOS and Android).

Customer Relationships

Kakao maintains its relationships with its retail customers through its mobile apps, and over the phone. This consists of a combination of self-service, through online FAQs and troubleshooters, and guided support through live chats.

Key Activities

Kakao focuses on developing and distributing mobile apps, particularly in social media and services, to retail consumers. These apps are provided free, and are used as means by which Kakao may acquire revenue through advertising and e-commerce sales.

Key Partners

Kakao has many key partners, depending on its business segments. Its e-commerce platforms are aimed at allowing businesses access to online retail markets – these businesses are thus key partners. The same arrangement applies also to its games platforms, which allow game developers access to retail consumers. Kakao also gains revenue from businesses seeking to advertise on its platforms – these businesses are also key partners.

Quite aside from these revenue streams, Kakao also partners with content providers to provide content for its platforms. These providers can come from its user base but some come from other more commercial sources. One example of the latter is Kakao’s 2016 partnership with the Singapore Tourism Board under which a new mobile platform, called Traveline Singapore, will be introduced to bring travel content on Singapore to Koreans.

Key Resources

Kakao’s key resource by far is its accumulated goodwill, which takes up well over half of its total assets. In terms of other assets, Kakao does not hold very much in terms of tangible assets, with the next major asset class being cash.

Aside from balance sheet items, Kakao’s other key resources would be its talented workforce – especially its business strategy and programming talent.

Cost Structure

Kakao’s major expenses are labour costs, and commissions to third parties – both of these each take up slightly under 30% of its operating expenses. Other key costs include ad agency fees and content fees.

Revenue Streams

Kakao’s key revenue streams are from advertising, sales of games and gaming subscriptions, and e-commerce.

Source of Revenue/Cost Revenue (FY 2015, million Korean Won) % of Total Revenue Sales Revenues 932,161 100% Advertising

583,841 63% Game

232,378 25% Commerce

67,241 7% Others

48,701 5% Operating Expenses (843,803) -91% Labor costs

(218,541) -23% Commissions

(236,859) -25% Advertising

(56,800) -6% Ad Agency fees

(105,615) -11% Content fees

(48,174) -5% Others

(177,814) -19% Operating Profit 88,358 9%