Release Date: May 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Kakao Corp (XKRX:035720, Financial) is actively evolving its messaging app into a super app by enhancing content offerings and social features, aiming to increase user engagement.
- The introduction of the Discovery section with short-form videos is expected to boost user engagement and time spent on the platform.
- Kakao Corp plans to roll out new advertising products that align with user behavior, potentially creating new revenue streams.
- The company is launching AI initiatives, such as Kanana, to enhance personalization and user experience, which could lead to new business models.
- Kakao Corp's commerce revenue grew by 12% year over year, driven by strategic product offerings and increased profit contributions from Kakao Shopping Live.
Negative Points
- Kakao Corp's consolidated revenue decreased by 6% year over year and 5% quarter over quarter, indicating financial challenges.
- The advertising market remains sluggish, with no clear signs of improvement, impacting revenue growth.
- Display ad revenue declined by 4% year over year due to reduced budgets from major advertisers.
- Content business revenue fell by 16% year over year, with competition intensifying in key markets like Japan.
- The company faces uncertainties in businesses reliant on commercial success, affecting overall growth prospects.
Q & A Highlights
Q: Can you provide insights into the advertisement market outlook for the second quarter and the impact of Kakao Talk's renewal and AI initiatives on future growth?
A: The advertisement market showed no clear improvement in Q1, with sluggish commerce and fashion segments. We are preparing new advertisement products for H1 to trigger growth in H2. We plan to expand feed-type advertisement products and introduce video ads to capture more ad budgets. We expect new services to gain market traction, with ad revenue regaining double-digit growth by Q4. Regarding Kakao Talk gift, GMV growth continues, and we are enhancing commerce experiences within the platform. The upcoming Kakao Talk revamp will further strengthen interactions and commerce opportunities.
Q: What is the financial outlook for the second quarter, and how do you plan to address the challenges faced in Q1?
A: In Q1, results were muted due to seasonality and a lack of content pipeline. However, we expect a rebound in Q2 with top-line growth and cost efficiency gains. The platform business remains strong, and favorable seasonality will benefit ad and mobility sectors. We anticipate stronger growth in H2 with the renewal of the talk platform and new business models. Content business challenges persist, but improvements are expected in H2 with a positive IP lineup.
Q: Can you update us on the potential sale of subsidiaries and affiliates, and how will the proceeds be used?
A: Discussions are ongoing regarding the exit of PEs invested in Kakao Group, but no specifics have been decided. We are streamlining businesses less relevant to our core, reducing subsidiaries from 147 to 104. Despite macro challenges, we aim to enhance efficiency and focus on core businesses. Proceeds will support growth in Kakao Talk Platform and AI, key pillars for future growth.
Q: What is the status of Kakao's collaboration with OpenAI, and what can we expect from this partnership?
A: The collaboration with OpenAI is progressing positively, focusing on creating a consumer-oriented AI service. OpenAI handles AI model development, while Kakao leverages its user experience and B2C services. The goal is to introduce an Agentic AI ecosystem by year-end, enhancing user engagement and platform capabilities.
Q: How do you plan to address the challenges in the content business, and what are the expectations for the second half of the year?
A: The content business faced challenges due to a lack of new titles and competitive pressures. However, we expect improvements in H2 with a positive IP lineup and structural profit enhancements in music and gaming. We aim to offset content business slumps with strong platform fundamentals and efficient spending.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
